Adient P.L.C. anticipates significant financial fallout from looming tariffs, but the automotive seating supplier won’t be left holding the bag, its CEO said.
Auto companies are scrambling to prepare for the President Donald Trump administration’s planned 25 percent tariffs on Mexico and Canada as soon as Feb. 1. A key part of Adient’s playbook is to pass that import tax up to the Detroit 3 auto makers and other customers.
“The customers have a level of understanding of what the impact is,” Adient President and CEO Jerome Dorlack said Jan. 28 on a call with investment analysts. “We’ve made it clear to them that this is not—at a 25-percent level or even at a 10-percent level—a burden that Adient is prepared to take on to our P&L on an ongoing basis and there will be a need for recovery that has to then be passed through the value chain.”
Dorlack said the company is engaged in “meaningful dialogue” with customers, working through the issue “in a very timely, I’d say almost hourly basis, in some cases.”
A similar discussion is happening between customers and suppliers up and down the automotive supply tiers as tariffs threaten to hurt bottom lines and ultimately increase the cost of new vehicles. As one of the first publicly held suppliers to report quarterly earnings this year, Adient provides a window into how tariffs will be absorbed by the supply chain.
Adient, which specializes in seating systems, finished its fiscal first quarter with adjusted net income of $23 million, down 20 percent year over year, on revenue of $3.5 billion, a 5 percent drop from the year prior.