USMCA Watch: General Motors’ Cuts Follow Clarity in Trump’s Trade Policies — Panjiva
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USMCA Watch: General Motors’ Cuts Follow Clarity in Trump’s Trade Policies

China 1762 Cons. Discr. - Autos 664 Italy 47 Mexico 506 South Korea 384 Tariffs 1175 Trade Deals 703 U.S. 3310 USMCA 374

Car-maker General Motors has launched a wide-ranging restructuring of its manufacturing operations, including the “unallocation” (temporary closure) of four factories in the U.S., one in Canada, one in South Korea and two others as yet to be identified elsewhere in the world. A major driver has been the decline in sales of some of the company’s sedan models which it is also cutting.

Yet, an emerging degree of regulatory certainty on tariffs may also have given the company the confidence to carry out the restructuring now. The company had previously in warned in June, as reported by Reuters, that steel and aluminum tariffs among others could result in “a reduced presence at home and abroad” as well as raising vehicle prices.

The signing of the U.S.-Mexico-Canada Agreement, outlined in Panjiva research of Oct. 3, has given clarity around the rules-of-origin for parts for its vehicles within its North American supply chain. Similar the resolution of the KORUS negotiations earlier this year will have reduced uncertainty for its South Korean operations.

The move has nonetheless come ahead of the completion of the section 232 review of the automotive industry which may lead to additional duties on imports of parts from outside of the U.S., Canada and Mexico.

Panjiva data shows the firm has recently its imports of auto-parts from outside of the USMCA area, with a 5.5% increase in the three months to Oct. 31 vs. the prior three month period and by 34.2% on a year earlier.

ON THE ROAD AGAIN, AHEAD OF PARKING FACTORY OPERATIONS

Chart shows U.S. seaborne imports of car parts associated with General Motors from outside North America.   Source: Panjiva

That’s been driven by a 5.6% sequential increase in imports from China – likely to preempt the increase in tariffs from January 1 – as well as a 40.7% increase in shipments from India. The latter may become a more important hub for exports if the section 232 review does not reach a conclusion. Imports from South Korea meanwhile have already begun to decline with 1.8% slide.

INDIA AN EMERGING HUB FOR GM’S U.S. IMPORTS

Chart segments U.S. seaborne imports of car parts associated with General Motors by origin.   Source: Panjiva

Leading suppliers to GM that may lose out from a mixture of reduced manufacturing in the U.S. as well as future tariffs on imports from China and elsewhere include Citic Dicastal which accounted for 14.7% of all GM imports of 17.3k TEUs in the past 12 months and are centered on exports of wheels from China. Outside China Atlas Bx, a battery producer from South Korea (4.5%) and Denso Thermal Systems from Italy (4.2%) may also lose out to USMCA-region suppliers.

WHEELS, BATTERIES AND PIPES MAY LOSE OUT IN GM RESHUFFLE

Chart segments U.S. seaborne imports of car parts associated with General Motors by supplier (including freight forwarders) and origin in the past 12 months, denominated in TEUs.   Source: Panjiva

General Motors has already started to accelerate its exports from Mexico to the U.S. and Canada with a 25.4% increase in the third quarter vs. the second. General Motors internal handling, which has increased by 23.0% over the same period. Second tier suppliers that have done well include plastics maker Grupo ABC with a 366% increase and wiring harness manufacturer Arneses.

REALIGNING SUPPLY CHAIN AS EASY AS ABC

Chart segments U.S. seaborne imports of car parts associated with General Motors by supplier (including freight forwarders) and origin in the past 12 months, denominated in TEUs.   Source: Panjiva

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