China trade disputes prove challenging, though BPI answers by shifting manufacturing; hope for the USMCA is on the horizon by end of year
Las Vegas—Tariffs have taken their toll on the automotive supply chain, from manufacturers to distributors to installers and, ultimately, end consumers, with increased prices. Many manufacturers, however, have taken proactive steps to avert some of those additional costs.
“We’ve had to move friction production out of Asia and China and into our India plant and Mexico facility,” said H. David Overbeeke, president and CEO of Brake Parts Inc. (BPI), who recently sat down with automotive journalists at AAPEX for an informal roundtable of discussion.
He added that BPI continues to grow and leverage its products and scale, though tariffs have required adjustments, such as acquiring four additional acres of land in India, which will which will double its size so it can increase production by the second quarter of 2021. It’s BPI’s lowest cost manufacturing location globally.
“Mexico has close proximity, so we’re hoping the new NAFTA (USMCA) agreement gets done soon for continuity and structure. People want a relief from the China tariffs and more working capital with less product ‘on the water.’ BPI has about 1,000 shipping containers at sea at any given time, whether it’s India over the Atlantic or from Canada across the Pacific.”
Many supplier costs incurred by tariffs have been passed along to the customer base. “We’re hoping the tariffs begin to ratchet down to help the industry. Unit sales have been a little softer, but the industry has pent-up demand because miles-driven is still high. It’s exciting — our growth has outpaced the industry.”
New calipers gaining popularity
In addition to reman products, Overbeeke said new caliper products are picking up steam, though tariffs have prevented them from the growth BPI had initially planned.
“Nobody wants to deal with returning cores in the reman space — it’s a hassle. The WDs that sell to installers prefer a one-way ticket without having to worry about sending a core through a return policy, waiting for a return credit and debating whether it was right or wrong.”
BPI launched its new line of new calipers four years ago that presently has 500 SKUs and will grow to 600 SKUs in 2020. “The only thing keeping it from rocketing skyward are the 25 percent tariffs,” he said. “The economics and calculations were all put into place and then a wrench was thrown into it, but that will change.
“The momentum right now is with new product, which is tough from the reman’s environmental perspective, but when an installer offers a customer a new product versus a reman product, they often option the new. ‘New’ is viewed as better — which isn’t always the case — but it’s a human tendency to go with new, regardless of whatever the product is.”
USMCA resolution appears promising
Overbeeke, who sits on Motor & Equipment Manufacturers Association (MEMA) board and is chairman for the Association for Sustainable Manufacturing (MERA), said efforts in Washington D.C. appear to be gaining traction and a USMCA agreement could be settled as soon as the end of this year.
“As an industry, we’ve been pushing hard with all our efforts. We’re hearing and hoping it’ll get done. People want rules and it’s hard to bring teams onto the playing field without them.”
New R&D facility coming online
Overbeeke said BPI has always been a leader in developing products using its own formulations and testing, though its R&D facility is more than four decades old and showing its age.
A new $5.5 million state-of-the-art facility is less than two miles from BPI’s headquarters in McHenry, Ill., and is presently undergoing a soft launch. “It’s incredibly modernized with material and product testing,” he said. “It’s an investment in capability and brings speed and durability.”
A formal grand opening is expected in the early spring, details will be forthcoming.