Weekly News Review | 18 June 2018 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

A Terrible State O’ Chassis

One of my favourite stage plays is the Irish playwright Seán O’Casey’s brilliantly evocative Juno and the Paycock. Written in 1924, the play portrays the events surrounding the Easter rising in Dublin in 1916 and its tragic effects upon a local family. The play’s last line, delivered by the drunken ne’er-do-well Joxer Daly, is: “The whole world’s in a terrible state o’ chassis [chaos].” Could the same be said of the world today, and of the automotive industry’s role in it?

Not too long ago, the automotive landscape seemed bright and sunny. God was in his heaven and all seemed well with the automotive world. New car sales in the United States were buoyant, the population of the United Kingdom was still largely sublimely unaware of the potential carnage of Brexit and Mexico and Canada were beneficiaries of the North American Free Trade Agreement (NAFTA). Now look at what’s happening.

If U.S. President Donald Trump follows through with his proposed 25% tariff on imported steel and 10% on imported aluminium - and Trump’s track record would suggest that he is capable of almost infinite changes of mind - the consequences for the U.S. auto industry could be severe. The respected automotive analyst company, LMC Automotive, recently predicted that up to two million fewer cars could be sold in the U.S. as American consumers baulked at the higher prices such measures would occasion. This might be good news for the used car market, and also for domestically-produced, and therefore cheaper, models, but sales of imported brands would undoubtedly suffer significantly. And then there is the unquantifiable number of drivers who would postpone the purchase of their new vehicle hoping for a regime change which would overturn Trump’s draconian tariffs. Vehicle manufacturers could, of course, absorb the increased costs and continue to sell to the U.S. market at current prices. Yes, and pigs might fly. All in all, it’s not good news for the auto industry.

Meanwhile, relations between the United States and Canada have reached what is probably an all-time low. Trump’s labelling of Canadian Prime Minister Justin Trudeau as “dishonest and weak” is not a statement likely to endear him to his northern neighbours nor to progress NAFTA negotiations. These negotiations are fundamental to the health of the Mexican auto industry which, in recent years, has prospered, largely based on its exports to the U.S. And then there is the seemingly never-ending Brexit situation. A terrible state o’ chassis indeed.

Sam Ogle

Sam Ogle

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