Looking for love in the auto supply chain

0:01NPR.

0:12One of the big economic surprises this year is how long it took tariffs to hit consumer wallets. The key word here is consumer wallets. If you're, say, a car company, then, well, tariffs have been expensive. That bill will likely be around$30 billion for the carmakers this year, according to Moody's. And that will likely end up on the consumer side eventually with higher car prices. Now, there is a solution for carmakers, and it gets to one of the main objectives behind tariffs. Buy American. Foreign automakers already have huge assembly plants in the U.S., but lots of parts and materials come from overseas.

0:49So to avoid these costly tariffs, why not just switch to buying those parts from an American supplier? Easy, right? But how do you actually meet those U.S. companies for everything from raw steel to finished parts to staffing? Well, there's always speed dating. This is The Indicator from Planet Money. I'm Stephen Basaha. And I'm Waylon Wong. On today's show, we go to an auto manufacturing speed dating event to see if tariffs can really lead to a spark between car makers and U.S. suppliers. And we learn why supply chain matchmaking is less quick playing than long courtship. We got to pitch this to Netflix, Stephen.

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2:40Come on in, find your buyers, have a seat, and happy selling. If you were looking to pick a romantic spot for a first date, you'd probably skip the ballrooms in Huntsville, Alabama's Von Brown Center. Between the fluorescent lights, those gray conference room dividers, and the more than 180 salespeople in loud pitching mode, it's not exactly a candlelit dinner. But one thing it does have in common with actual dating are the jitters. Jack Grace is with Landrum Workforce Solutions and is the director of sales for its workforce management team. The company provides staffing and consulting. So how's the speed dating been going?

3:16Nerve-wracking, you know, because you get five minutes to either get it right or not get it right. And he's right. Sellers like Jack get just five minutes to pitch many of the biggest car companies like Honda, Mercedes and Hyundai. Until the beep means it's on to the next date. The Southern Automotive Conference has been doing this matchmaking event for 13 years. The big idea here is just making networking easier. And yes, it is only five minutes. But Jack says that's way better than the typical conference experience where you're running around the trade floor trying to find a buyer and then only end up pitching to another salesperson.

3:54You're both wasting each other's time selling your product to somebody who can't buy it. Having this environment where it's very distilled, albeit a little chaotic, is really interesting. And one thing that's got just about everyone's interest this year is tariffs. Yeah, on the buyer side, there are a lot of foreign car companies feeling that tariff sting. And American companies have not been spared either, like Baxter Enterprises out of Tennessee. It provides tools and finished parts for automakers like Mercedes and BMW. Doug Drake is here representing Baxter. He says the cost of materials he gets from overseas are just starting to go up.

4:33A lot of it, I'm saying anywhere from 15 to 50 percent, depending on what it is. 15 to 50 percent, 50 percent is pretty high. Yeah, yeah. That's some on some of the metal clips and components. Yeah, it's 50 percent. Now, we don't know if that's all tariffs, but there is currently a 50 percent tariff on steel from most countries. For auto parts, it's 25 percent. And don't expect any Supreme Court tariff relief here. These tariffs are not the reciprocal tariffs the court could get rid of. Now, Doug's not here just looking for the supplier with the lowest price. He wants to meet someone he actually wants to work with.

5:08I like to be able to shake hands with them, meet them face to face. And you can get a feel for kind of what they're, you know, I can get a feel generally for their personality and see if they're going to be an option. Does personality matter in the manufacturing world? It does to me.

5:26Does Doug like pina coladas and getting lost in the rain? He kind of gave me more a Guinness kind of vibe, but I don't think that. But it's still, yeah, hopeless romantic at the heart there of Doug. And he is not the only one there being picky. Marlena Melantine represented the joint Mazda Toyota factory in Alabama. We're looking for ways that we can maybe save money with tariffs being what they are now. So we're just open to whatever's out there. Yeah, that's what I heard was that maybe companies are more open to some of these pitches because of tariffs right now. And that's your case? That's exactly true.

6:00Absolutely. More open, but Marlene is not rushing into anything. We have source for most of the things that we procure, but we're always open to better services, better pricing. So a bit of a mixed message here. Tariffs are leading these car makers to look at American suppliers, but some are saying they don't really need them. Amy Broglin-Peterson says this is like actual dating. You never want to look like you're desperate. Like it's like a strategy. Amy knows that strategy well. She used to be a buyer for Ford and now does her own consulting along with teaching at Michigan State University. Of course, Amy says not all carmakers are playing hard to get just as a strategy.

6:42Truly, though, there are some other reasons why they would kind of come off that way. And number one, a lot of it could be tied up in long term agreements. Agreements with other suppliers that they would have to drop to switch to an American company. Ooh, Waylon, we got some drama stealing someone else's car maker. Save it for the Netflix pitch, Steven. Amy doesn't believe these car companies would agree to contracts with big penalties for changing suppliers. So that's not the issue with switching. But still, you've sunk capital into tooling, typically with suppliers. And then more importantly, perhaps, in many cases, you have to validate suppliers.

7:21Validating suppliers. Think of this as the phase past that first date, past the flirting. It's the serious relationship talk. Can the supplier meet the company's specs? Will their parts mesh well with parts from other suppliers? So that can be a very lengthy process. And it's certainly one you don't want to skip over or take lightly because it can mean, you know, quality issues. And thus, higher cost, warranty cost, repair cost, you know, degraded consumer perception and things like that. So there's a lot of reasons that they, you know, aren't just eagerly saying, yeah, let's strike a deal. And, you know, we want to move, right?

8:07I spoke with the auto speed dating events organizer. And she said she does always hear from buyers that they have still found new suppliers at the event. Though she doesn't have hard numbers on that. She also said the industry could use more breathing room on tariffs. It can take more than a year to get a supplier's parts onto a car. In the meantime, car companies are still paying those tariffs. At the same time, if tariffs went away tomorrow, that could pull the rug out from some of these deals in the works. Chris Miller understands how hard it is to make a deal with these car makers. He's here representing Olympic Steel out of Georgia.

8:45He wants to see if any of the buyers want the steel or some of the other materials he has to sell. And if not, well, sometimes a five-minute meeting is more like a one-minute meeting. We're under a one-minute meeting. So you kind of can get that feel pretty quick. Because you heard what she said. They do the same thing that we do. That's the other challenge. Someone like Chris might not be competing against a foreign steel supplier, but the company itself. And he might not know that until he sits down and asks. Perfect. Thank you so much for your time. Pleasure.

9:24Hey, so last meeting, how did it go? Went good. Yeah, got a card and that could be a potential good one. Chris says the matchmaking is not about getting to a deal in five minutes. Instead, it's about getting that card, making that connection. It's about the chance at a longer second date. because when it comes to changing up supply chains, even the car world takes things slow. This episode was produced by Angel Carreras and engineered by Robert Rodriguez. It was fact-checked by Tyler Jones. Kate Concanon is our editor, and The Indicator is a production of NPR.

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