Automotive Supply Chain Faces Major Challenges Under Tariff Storm: Magna International Inc. (MGA.US) CEO Seeks Solution to Address "Scissors Gap"

In a factory in Michigan, Swamy Kotagiri, CEO of Magna International Inc. (MGA.US), shuttles between robotic arms and sparks flying around the production line. The leader of this global automotive parts giant is facing the most challenging issue of his career - how to "control the uncontrollable factors" in the industry earthquake triggered by trade policies. "In the past four years, one black swan event after another has occurred," Kotagiri pointed to the electric car battery shell being assembled on the assembly line, "The certainty, rhythm, and stability that the automotive industry used to rely on have now become luxuries." This leader of a commercial empire spanning 28 countries and 170,000 employees reveals a rare sense of anxiety in his tone. Magna's massive factory in Michigan highlights its key role in the complex global automotive supply chain. The company has 59 factories in the United States, 50 factories in Canada, and 33 factories in Mexico, as part of the legacy of the North American Free Trade Agreement of the 1990s, which formed a highly interconnected system that transports components from one country and produces cars in some of the world's largest markets. However, Kotagiri and other automotive industry leaders are now facing a disruptive industry. President Donald Trump announced at the end of March to impose a 25% tariff on imports of foreign cars, which is expected to raise consumer prices, reduce demand, and hit employment growth. With over 170,000 employees in 28 countries, Magna's scale far exceeds most major customers such as Ford, General Motors Company, and Toyota. Just hours before Trump's request for a 25% tariff, Kotagiri said there is no "simple way to absorb these costs" and indicated that most costs will be passed on to consumers. Analysts predict that Trump's tariffs are expected to increase the cost of each car by thousands of dollars and bring billions of dollars in losses to car manufacturers and suppliers. Flexibility is Key Magna has already withstood challenges such as union strikes, semiconductor shortages, and lower-than-expected demand for electric cars. Facing tariffs, Kotagiri said Magna is trying to be as flexible as possible, including its electric vehicle structure factory in St. Clair, Michigan, which produces battery casings for models such as GM Hummer and Silverado EV. Kotagiri said suppliers can reprogram swinging robotic arms to assemble frames or engine mounts if needed. "The world has changed," Kotagiri said. "Flexibility is key. We need influence, capacity, and expertise to provide assistance." This supply chain resilience test is crueler for Magna's small and medium-sized suppliers. "They are being squeezed by the scissors of rising costs and shrinking revenues," warned Laurie Haber, head of the automotive team at consulting firm Wipfli, adding that many suppliers do not even know how many national borders their products cross. This information blind spot could become a fatal flaw in the era of tariffs. Under the shadow of tariffs, the automotive industry is experiencing a two-way divergence: Hyundai Motor announced a $21 billion investment plan in the U.S., while supplier Lear Corporation (LEA.US) is considering expanding production. However, S&P Global, Inc. predicts that rising automotive costs will lead to a sharp decline of over a million vehicles in annual sales in the U.S. Magna's response strategy is significant - deepening local cooperation while accelerating its global market layout. "The strategic value of the Chinese market is being reshaped," Kotagiri revealed, with China accounting for 13% of the company's revenue becoming a key growth pole. This enterprise with 69 factories and 30,000 employees in China is now focusing on the trend of Chinese car manufacturers going global: "When Chinese manufacturers go to Europe and even globally, Magna must position itself in advance." From the North American Rust Belt to the manufacturing hub in the East, Magna's supply chain network is undergoing painful transformation in the tariff storm. Kotagiri knows that this war without gunpowder will eventually reshape the genetic map of the global automotive industry.