US-China trade talks resume in Washington

Dive Brief:

  • The U.S. and China will hold additional rounds of trade talks this week in Washington, the White House announced Monday.
  • “Deputy-level meetings” begin Tuesday, the White House said, led by Deputy United States Trade Representative Jeffrey Gerrish. The U.S. will hold “principal-level meetings” starting Thursday. U.S. Trade Representative Robert Lighthizer will lead those talks, which will also include Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross, Assistant to the President for Economic Policy Larry Kudlow and Assistant to the President for Trade and Manufacturing Policy Peter Navarro.
  • The two countries will discuss structural changes related to trade and China’s agreement to “purchase a substantial amount of goods and services” from the U.S., but did not offer additional details, the White House said.

Dive Insight:

The administration has kept mum for the most part on details of the ongoing trade talks between Washington and Beijing.

After the most recent round of talks, which took place in Beijing, U.S. officials touted “progress” on trade issues the two countries set out to resolve during a 90-day negotiation period, but they offered no specific detail on what that progress entailed.

China purchased shipments of soybeans from the U.S. (the exact amount is unclear) since the trade talks began, a sign of progress in China agreeing to import “substantial” amounts of goods from the U.S. On structural issues such as intellectual property and technology transfer, however, neither the U.S. nor China has revealed any specific progress.

Donald Trump hinted last week he might consider an extension to the March 1 trade negotiation deadline, although the White House made no mention of that in its latest announcement on continuing trade talks. Lighthizer previously called March 1 “a hard deadline.”

The numerous unknowns surrounding trade talks and deadlines leave businesses in a state of uncertainty related to tariffs.

Economic Policy Uncertainty uses economic data and news reports to create a monthly index of uncertainty. In January 2019, it measured U.S. uncertainty at an index of 292, an all-time high since the index began tracking data in 1997 and slightly higher than the global index of 285. In January 2017, the U.S. index measured just 161.

Still, analysts are hopeful the U.S. and China will reach a deal later this year, though it likely will come after the March 1 deadline, and it’s unclear what effect the trade deal would have on existing and future tariffs.

19 February 2019 | Shefali Kapadia | Supply Chain Dive

U.S. Retailers Bracing for BREXIT

Top of mind for U.S. shippers doing business in the EU will be the current state of BREXIT. Theresa May will update Members of Parliament on Tuesday about recent Brexit talks as she continues to seek support for her deal.

As the Retail Industry Leaders Association (RILA) prepares for its annual Retail Supply Chain Conferencelater this month much talk is expected to be generated by global trade tensions and profound shifts in cross border dynamics.

Top of mind for U.S. shippers doing business in the EU will be the current state of BREXIT. Theresa May will update Members of Parliament on Tuesday about recent Brexit talks as she continues to seek support for her deal.

Absent such an agreement, logistics managers will face a whole host of new challenges, says Graham Parker, CEO of Gravity Supply Chain, a global SaaS company based in Hong Kong.

In the event of a “no-deal” Brexit, disruption to freight and aviation is likely to cause significant hurdles, he adds.

“A ‘no-deal’ outcome will mean no transition period which could result in limited transport permits and no agreement around aviation,” says Parker. “Businesses need to begin evaluating their existing supply chain models to prepare for potential supply chain disruption.”

For retail businesses, in particular, this will undermine the effectiveness of their speed to market, and potentially trigger a negative impact on customer loyalty, Parker maintains.

“Enterprises need to safeguard themselves on two fronts – firstly by ensuring the cost of operation remains manageable and secondly by reducing the likelihood of supply chain disruption affecting the consumer,” he advises.

According to Parker, real time visibility of the supply chain will be essential to achieving these goals. Fact based decision-making, informed by a consistent feed of real time data from crucial touch points across the entire supply chain, will allow businesses to react quickly to supply chain disruption, allowing them to overcome the strategic challenges that may arise.

“Retail organizations are already facing soaring rent, and changing customer expectations in the age of online retail,” he says. “Many retailers have invested in technologies that have enabled them to innovate, but a significant number are yet to undergo digitization in their supply chains.”

The impact of a “no-deal” Brexit outcome, presents a further threat to retailers, Parker concludes:

“Moving quickly from traditional and out dated manual processes, and into digitized management processes that enable essential real time visibility, will be crucial to companies successfully identifying, and subsequently overcoming, the logistical challenges.”

Meanwhile, RILA members have warned of immediate damage to their supply chains, while new trade barriers and higher costs after March 29 could eventually force retailers to rethink their business in the United Kingdom.

12 February 2019 | Patrick Burnson | Supply Chain Management Review

How the Auto Industry Is Shifting Storytelling Gears—Thanks to Millennials

Windows rolled down, music blaring, car packed with friends (or just that special someone). If the image of the car as a ticket to freedom appeals to you, well, let’s just say you’re probably not that young anymore.

For young people today, the old auto industry narrative about The Car—emblem of coolness, inspiration for countless songs and movies, and pathway to freedom from authority figures—has come to a screeching halt. These days, many teenagers and young adults would rather grab a ride from Mom or Uber instead of getting behind the wheel themselves.

The trends are forcing automakers to rethink their millennial marketing strategies and brand story. When industry disruption upends a narrative that worked for generations, how should brands respond?

The Classic Car Story, In Transition

While it’s true that plenty of people across age groups still buy cars, there are several trends that point to serious changes in the way people perceive cars and engage with them.

For starters, more and more teenagers are deciding not to get driver’s licenses. According to a study by Michael Sivak and Brandon Schoettle at the University of Michigan Transportation Research Institute, just 24 percent of 16-year-olds had a driver’s license in 2014—a big drop from 1983, when 46 percent did. Older teens showed a similar decline. Sixty-nine percent of 19-year-olds had a driver’s license in 2014, versus 87 percent in 1983.

In fact, people across ages are forgoing driver’s licenses. The same study found for people aged 16 to 44, the percentage who have driver’s licenses has decreased versus years ago.

Given the downward trend in driver’s licenses among younger people, it’s not surprising that car ownership is changing, too. Although millennials are still purchasing cars—and at higher rates than during the recession—car ownership is still lower than it was back in 2000. The numbers also suggest that young people are choosing to delay buying cars, just as many are choosing to delay moving out of the house or getting married, according to the Los Angeles Times.

What’s more, the relationship teenagers and millennials have with cars—the story they tell themselves about car ownership and what it means—may have fundamentally changed. But what are the reasons driving this change?

“Millennials buy cars more pragmatically. Maybe they missed that moment as teenagers when you deeply fall in love with cars, or a car, or personal autonomous transportation,” said John Paul MacDuffie, management professor at the Wharton School of the University of Pennsylvania, in a story forKnowledge@Wharton. “And they are forever going to be more on the pragmatic car-as-commodity, car-as-appliance part of the equation.”

Increasingly, young people see driving as a hassle. In another survey from researchers Sivak and Schoettle, the top three reasons young adults ages 18 to 39 gave for not getting driver’s licenses were “too busy or not enough time to get a driver’s license” (37 percent), “owning and maintaining a vehicle is too expensive”(32 percent), and “able to get transportation from others” (31 percent).

When teens and millennials do need to get somewhere, they seem less averse to having a friend or a parent drive them. Options like public transportation and ride-sharing services like Uber and Lyft diminish the necessity of buying a car.

Others postulate that mobile devices and the Internet are to blame. Because teens can connect socially via apps and messaging, they no longer need to drive somewhere to get that social experience in person. A survey by KRC Research and Zipcar seems to confirm the idea: Researchers asked participants to what extent they agreed with the statement, “With access to social networking sites such as Facebook and Twitter, text messaging and online gaming, I sometimes choose to spend time with friends online instead of driving to see them.” Over half of 18- to 34-year-olds said they agreed, the highest share among any other age group, according to a report from Frontier Group and the U.S. PIRG Education Fund.

When and if they decide to buy, millennial motivations seem to be different than those of previous generations. Environmentally conscious drivers may seek eco-friendly cars. Budget-conscious millennials want affordable, practical options, given that many must balance car ownership with other financial stressors like student loans.

Shifting Gears

The data above point to major disruptions in the typical automobile narrative in America. Getting a driver’s license used to be a rite of passage for teenagers, owning a car a major life event. If attitudes toward cars have changed permanently, how is the auto industry changing its millennial marketing plan and its brand storytelling strategy?

For proof that millennials are radically shifting the car-ownership story, look no further than Honda’s marketing campaign for its Clarity Electric vehicle. Gone are the iconic shots of the car on the open road or in a cosmopolitan city. Instead, the campaign’s brightly colored animations center on pithy messages with an environmental tilt, dubbed “The ABCs of a Brighter Future.” These “ABCs,” which are hosted on their own Instagram account, include carpooling, enjoying nature, and, curiously, harvesting yucca from the backyard garden. Car as your ticket to freedom? Maybe not. According to this narrative, Honda is your choice if you’re environmentally conscious, practical, socially responsible, and possibly also into container gardening.

As messaging about cars has changed, so too have the channels brands use to reach millennials. A recent Suburu campaign utilized user-generated content and social media influencers to promote its millennial-focused Impreza. The #MeetanOwner campaign boasted 20 Instagram influencers, including photographers, athletes, and musicians, to foster positive brand sentiment. Potential car buyers could visit to check out photo and video testimonials from Suburu owners and even ask them questions about their cars. What’s striking about the drivers’ stories is that they all live active, passionate lifestyles, and the vehicles they own serve to facilitate those passions (note that the act of driving itself is no longer the passion). Suburu stands out from the pack in developing an innovative way of leveraging user-generated and influencer content to help share its brand story. The campaign earned over 1.9 million likes as a result, according to Mediakix.

From Automaker to Tech Leader

In the future, the narrative surrounding car ownership could change even more dramatically. As Google, Tesla, and Apple develop driverless and electric vehicles, buying a car could become akin to buying an iPhone. Instead of a rite of passage story, people will buy cars because they seek utility and technological innovation. The companies that best position themselves as the vanguard of the latest and greatest technology—supporting not just the vehicles themselves but rather the entire digital vehicle ecosystem—will find themselves winning the game of powerful brand storytelling.

Already, traditional car makers are showing signs of moving in the direction of tech leader. Cadillac, BMW, and Honda are creating car-sharing programs or developing cars specifically for car-sharing, hoping to compete with millennial-friendly Uber and Lyft, according to The Verge. Ford is snapping up tech talent in order to have a hand in every aspect of the self-driving industry, including the software used by driverless cars and the services related to them, according to the New York Times.

In the future, choosing a car or a ride-sharing service may be as much about choosing the technology platform as it is about choosing the actual car model. As a result, brand stories will shift toward emphasizing their prowess as tech leaders versus showcasing the actual experience of driving or riding in a car. Consider Elon Musk’s recent gambit: The CEO sent a cherry red sports car into space as the payload for the flight of the Falcon Heavy rocket, all captured in a 43-minute webcast that drew millions of viewers, according to Bloomberg. The point of this marketing stunt isn’t to promote the specific Tesla convertible that was sent into space or even the SpaceX rocket. It’s about solidifying Tesla’s and Elon Musk’s position as brands on the technological cutting edge.

While America’s relationship with cars may be changing—and with it, the stories that we tell ourselves about driving and buying cars—at the end of the day, plenty of people still want and need vehicles. The old story about driving and owning a car as a rite of passage may not resonate with today’s younger drivers. But that doesn’t preclude new stories from forming about cars. In the future, the story driving our engagement with cars may have more to do with technology and practical concerns. Brand stories may change after an industry disruption, but for automakers, it’s far from the end of the road.

09 February 2019 | Krystal Overmyer |

John Dingell’s devotion to the auto industry came with a price

John Dingell was a staunch defender of the auto industry, a statement that perhaps undersells the impact of a man credited with helping save the industry during its darkest days.

As the longest-serving member of Congress, Dingell, who died Thursday, had a role in shaping American life through legislative efforts involving health care, the environment and civil rights, but as a bulldog for the auto industry and its workers, the Dearborn Democrat’s efforts were both applauded and criticized.

Marick Masters, a business professor at Wayne State University and director of the Labor Studies Center, said Dingell was a champion of the auto industry because he was a champion of working people.

“He believed the auto industry was essential to building a middle class and a high quality of life for working people in Michigan and across the country,” Masters said. “That’s why he wanted to protect it to the greatest extent possible.”

The same values drove the commitment to civil rights and social justice for African-Americans, many of whom worked in the factories, said Masters, 65. “Two things that really stand out to me about John Dingell would be his commitment to people and treating people with dignity and respect regardless of their status in life.”

Kristin Dziczek, vice president of the Industry, Labor & Economics Group at the Center for Automotive Research in Ann Arbor, said Dingell’s role in saving the auto industry simply can’t be overstated.

“John Dingell was instrumental to saving Chrysler and General Motors in 2009,” Dziczek said.

Very simply, Dziczek explained, too few lawmakers had factories in their districts and they didn’t understand the importance of the legislation being crafted during the Great Recession bailout. That effort provided approximately $80 billion — of which about $70 billion was recovered — for GM, Chrysler and other entities.

Allowing them to collapse, economists believed, “would have caused the entire industry to collapse and thrown the Midwest into a deep depression,” according to previous Free Press reporting.

“You needed John Dingell’s leadership in the House to get that deal done,” said Dziczek, who had known Dingell since her time as a congressional staffer in the 1990s and worked directly with him in her role at the Center for Automotive Research.

Dingell’s defense of the auto industry did not make him a beloved figure everywhere, as noted in a Wall Street Journal obituary:

“His closeness to the auto industry — some environmentalists called him ‘Dirty Dingell’ or ‘Tailpipe Johnny’ — was seen as a factor in his unceremonious removal from the (House Energy and Commerce) committee’s chair” in 2008.

Legendary consumer advocate Ralph Nader, in a 2014 Facebook post ahead of Dingell’s pending retirement from Congress, referenced Dingell’s “vigorous oversight and investigations of federal departments and agencies that were lax, riven with conflicts of interest, or mistreated whistle-blowers” but also the “darker side” to his liberal image.

“He was totally and cruelly indentured to the auto industry even though he was from an overwhelmingly safe Democratic district. More than any other lawmaker, Democratic or Republican, he fought to make sure that the auto Goliaths got their way in Congress and at the (Environmental Protection Agency) and the Department of Transportation,” according to the Nader post.

Nader said Dingell’s efforts cost the UAW tens of thousands of jobs.

“In the greatest ironies of his lengthy career, he helped mightily in sheltering the technological stagnation of Detroit’s auto barons from innovation-advancing regulation that eventually cost them massive market share to more fuel efficient and higher quality foreign imports from Germany and Japan,” Nader wrote.

Intense questioning

Joan Claybrook, who was administrator of the National Highway Traffic Safety Administration in the Carter administration and is a current board member of Advocates for Highway and Auto Safety, described Dingell as a “tough cookie, no doubt about it.”

Claybrook said she and Dingell had a “very respectful” relationship, but they also fought.

When Dingell wanted information he often sent one of his infamous “Dingell-grams,” which might include 1,400 questions.

“He was very intent on making sure I didn’t do anything to hurt the auto industry. He viewed that as his role as a member of Congress in Dearborn and his obligation,” Claybrook said.

However, she said Dingell was not opposed to improving vehicle safety. Claybrook noted that in 2005 her organization placed an ad in the Dearborn Press & Guide thanking Dingell for his efforts on legislation to, among other things, help prevent fatal rollover crashes.

“He knew that safety was important, but he also made it clear that we had to fight to get the standards issued and had to take the industry views into consideration,” Claybrook said.

Dingell had pushed back against complaints that he was too close to the auto industry, especially through his marriage to Deborah Insley, now U.S. Rep. Debbie Dingell, D-Dearborn, who had work and family ties to General Motors.

“I was fighting for autoworkers long before I met Deborah,” according to a Washington Post obituary referencing comments he made to the paper in 2010. “The fact is that I am not married to the auto industry, but I am elected to represent the people of Michigan and in our part of the country. My people live and die by the success of the auto industry and manufacturing.”

Dingell’s environmental evolution

Harley Shaiken, a professor at the University of California-Berkeley, said Dingell had an open mind.

“Initially, he was skeptical on environmental issues, but when he understood the severity of the threats, he embraced issues and was able to carry them through in legislation. He made the industry accept something they were reluctant to go for. Even though environmentalists may feel he didn’t go far enough, he went much further than what would’ve been expected,” Shaiken said.

Shaiken, who specializes in labor and the global economy, knew Dingell personally.

“John Dingell was a deep advocate of autoworkers and workers more generally,” Shaiken said. “He understood you had to defend the industry to protect the jobs and the livelihoods of those workers. He did it in a tireless, accessible way. He knew how to compromise and, when necessary, stand his ground.”

Most importantly, Dingell never lost touch with his roots, said Shaiken, 73, whose grandfather moved from Ohio to Detroit to earn $5 a day at Ford’s Highland Park plant and spent most of his 33 years on the line at the Rouge.

“You could find John Dingell at the UAW Local 600 Christmas party or welcoming the assembly of the Ford Fusion at the Flat Rock Assembly Plant. The appreciation of his achievements didn’t simply come in executive suites but from deep affection among union reps and workers in the plants,” Shaiken said.

John McElroy, a longtime industry analyst and host of “Autoline After Hours,” grew to know Dingell through their media appearances together.

“I’m kind of a defender of the automotive industry, too. Especially as Detroit and GM and Chrysler were going into bankruptcy,” said McElroy, who’s 65. “I was one of the lone (voices) out there going, ‘Look, we’re going to get money from Congress, restructure and come back and set sales records.’ Because I was so out there, that’s probably how John knew who I was. He had seniority and clout and gravitas, but he was very approachable.”

No one can really quantify the impact Dingell had on the lives of Michigan families and the people of America, McElroy said.

“He’s got his fingerprints on 30 or 40 years’ worth of legislation,” said McElroy, whose father worked at Ford.

He understood the industry

The Center for Automotive Research’s David Cole, 81, has known Dingell for “many years” and had a lot of interaction with him. Cole said Dingell was crucial to helping pass policy to protect the auto industry even in times of uncertainty such as when Volkswagen introduced the Beetle and Asian automakers entered the U.S. market. Both instances disrupted sales of U.S. automakers.

“He always understood the importance of the industry,” said Cole, who is chair emeritus of the Ann Arbor-based center.

For example, the economic multiplier for each job in the auto industry is 10, said Cole. That means there are nine other jobs that flow from each direct industry job. The economic multiplier for a typical job on Wall Street is only two.

“Most people are unaware that the economic multiplier in the auto industry is more than just the industry, there are a lot more jobs that are really important,” said Cole. “John was aware of that.”

So aware of it that despite being a Democrat and a UAW supporter, if Dingell saw that a UAW benefit would hurt the overall industry, he was the “voice of reason” with UAW leaders to back down, Cole said.

Dingell’s long tenure in Congress gave him a deep understanding of politics and how to work it, too, Cole said.

“The experience he developed over time and the wisdom that came with it was really important,” said Cole. “It made him really understand his role as a political leader to accomplish big things. Debbie is following on that path too.”

Dingell’s work on the Clean Air Act led to the invention of catalytic converters and a dramatic reduction in vehicle emissions, Cole said.

“It was done at a pace that the industry could meet it as automakers did research and brought this technology into play,” Cole said. “Without someone like John we would have had much more political chaos in the auto industry, in my opinion. You didn’t see him in a table-pounding discussion. He was subdued but a strong personality.”

Dave Sullivan, 39, an auto industry analyst who worked in the factory at Ford Motor Co., and in management, met Dingell many times at social events and remembers stories growing up when his father worked at Ford.

“John Dingell, while some may not have agreed with everything he stood for, he was a united voice for Detroit’s union members, salaried ranks and suppliers,” Sullivan said. “The timing and reasoning for losing his seat in 2008 came down to his stubbornness to put Detroit first, even as Detroit’s darkest days were still yet to come. Dingell put Detroit on a pedestal, ahead of the environment, and gave Detroit a voice even as the population dwindled and The Big Three’s market share shrank.”

Sullivan, now a global executive in the e-mobility industry, said, “Detroit lost their biggest advocate in D.C. this week. You didn’t have to know him personally to know what he stood for.”

08 February 2019 | Eric D. Lawrence | Detroit Free Press

Retail imports strong ahead of possible tariff hikes

Dive Brief:

  • U.S. retail container imports were up 8.8% in December over November — down from the peak last fall but still higher than normal — as the tariff increase on goods from China looms, according to the latest Global Port Tracker report from the National Retail Federation (NRF) and Hackett Associates.
  • Overall, 2018 experienced a record 21.8 million TEU, an increase of 6.2% over the 2017 record of 20.5 million TEU. Estimates for the first half of 2019 predict volumes will rise 4.1% over the first half of 2018.
  • Retailers have accelerated imports to beat the March 1 deadline when U.S. tariffs on $200 billion worth of Chinese goods will increase from 10% to 25%, unless negotiations are successful.

Dive Insight:

Talks began in December to resolve the trade dispute, but retailers have been preparing for higher costs on imports since last year, according to NRF.

“With trade talks with China still unresolved, retailers appear to be bringing spring merchandise into the country early in case tariffs go up in March,” said Jonathan Gold, vice president for supply chain and customs policy. “We are hopeful that the talks will succeed, but until the trade war is behind us, retailers need to do what they can to mitigate the higher prices that will inevitably come with tariffs.”

The Globe Tracker Report covers the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.

Retailers may be doing their best to ensure stocked shelves, but a side effect of robust imports is a shortage of space in warehouse and storage facilities. Available U.S. warehousing and logistics space sits at a multiyear low, according to real estate researcher CBRE Group. In the fourth quarter of 2018, availability for industrial real estate fell to its lowest level since 2000.

To make do, companies and warehouse providers are scrambling for creative solutions like short-term storage trailers and digital marketplaces for warehouse space.

Retail products are not the only commodities surging ahead of the tariffs. According to BIMCO analysis of USDA figures, 754,609 metric tons of soybeans were ready to be shipped to China in January, compared to 25,347 metric tons in December.

13 February 2019 | Garry Wollenhaupt | Supply Chain Dive

Georgia’s ports extend their role for carmakers

The linked ports of Brunswick and Savannah in Georgia, in the south-east US, are playing a growing role in the supply chain of North America’s leading vehicle manufacturers, delegates at the Georgia Foreign Trade Conference were told recently.

Speaking at the event, Kia announced it was to start dispatching its new, eight-person Telluride SUV from the port of Brunswick this month. The South Korean OEM has been using Savannah to ship parts in since 2009, when Kia Motors Manufacturing Georgia (KMMG) first began assembling vehicles at West Point for the domestic US market. Both Brunswick and Savannah are operated by the Georgia Ports Authority (GPA).

“From the support we receive from GPA with our inbound parts from our global supply chain to supporting our export of finished vehicles to current and future markets, GPA will play an important role,” said Stuart Countess, KMMG’s chief administrative officer and vice-president.

“[Kia’s] decision to export the Telluride via Brunswick highlights the benefits of having North America’s largest container port and largest autoport within 85 miles [136km] of each other,” commented Griff Lynch, executive director of the GPA. 

Speaking at the same event, Mark Boucher, director of vehicle logistics for Volkswagen Group of America, outlined Savannah’s role in handling parts destined for VW’s Chattanooga plant and Brunswick’s in handling exports of the Passat and Atlas.

Boucher said VW would soon launch a new version of the Passat and that the company had “robust plans” to deliver the Atlas to more than 30 export destinations this year.

Jay Johnson, intercontinental logistics specialist for Volkswagen, who oversees the import of parts supplying Chattanooga, said: “We continue to build our partnership as our needs change and as the GPA continues to add more logistics value by improvements.”

Gerry Lee, vice-president of planning and logistics for Subaru of America, meanwhile, said Subaru relied on the GPA to import its Forester, Crosstrek, WRX and BRZ models. “The port of Brunswick is the right fit for Subaru’s vehicle supply chain because it is a great location to support the retailers in our Atlanta and Orlando sales zones,” said Lee. 

GPA also highlighted its operations for General Motors and Mercedes-Benz at the event.

Parts for GM’s Acadia SUV, built at Spring Hill, Tennessee, come in via Savannah and, starting this year, GM will export around 12,000 Acadia SUVs through Ocean Terminal, it said. Parts are also imported through Savannah for Mercedes-Benz’s plant in Vance, Alabama, while its finished vehicles are exported via Brunswick.

Last October, GPA announced it was to add 24 hectares (60 acres) to create 8,250 car parking spaces and support vehicle handling at Brunswick. The port authority is also doubling dockside rail capacity for building loads for inland distribution.

11 February 2019 | Steve Garnsey | Supply Chain Dive

Trump, Xi won’t meet before March 1 tariff deadline

Dive Brief:

  • President Donald Trump told reporters at the White House Thursday he would not meet with Chinese President Xi Jinping before the March 1 deadline, after which 10% tariffs are set to rise to 25%. Trump said previously he would meet Xi in February.
  • When asked by reporters if he planned to meet with Xi next month, the President said, “Not yet. Maybe. Probably too soon. Probably too soon,” according to Reuters.
  • U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing next week for another round of trade discussions. Lighthizer and Chinese Vice Premier Liu He met last week in Washington for trade talks.

Dive Insight:

Trade discussions between the U.S. and China are far from over. Several rounds have taken place since Trump and Xi agreed to a 90-day halt on tariff increases last year at the G-20 summit, and additional discussions are scheduled for next week.

But the likelihood of reaching a deal in the near future is waning. The deadline is rapidly approaching with no plans in place for the two presidents to meet. “No final deal will be made until my friend President Xi, and I, meet in the near future,” Trump tweeted on Jan. 31.

What happens to tariff rates on March 2 remains unclear. After the 90-day “cease-fire” was announced, the Trump administration maintained tariffs on $200 billion worth of Chinese imports would rise from 10% to 25% if the two parties did not reach a deal before the deadline.

“The likely outcome is that the tariffs remain at the current 10 percent rate,” CNBC reported Thursday, citing administration officials and sources briefed by the White House.

But Reuters later cited three anonymous sources who indicated the CNBC report was incorrect.

Maine Pointe CEO Steve Bowen told Supply Chain Dive he doesn’t expect Trump to back down “one iota” from his plan to raise tariffs and negotiate trade issues with China.

He does anticipate the U.S. and China could reach a deal later this year to remove the tariffs, with the upcoming election cycle playing a role in the timing. The CEO of agricultural trader Archer Daniels Midland (ADM) made a similar prediction, expecting a trade resolution with China this year.

The March 2 tariff hike (if it happens) won’t come as a surprise to the business world. The U.S. and China sought to resolve deep-seated trade issues in just three months, and analysts largely agreed the short time frame did not provide sufficient time for matters such as intellectual property and technology transfer.

Businesses have been planning for the scenario of rising tariffs at the beginning of next month, by rushing imports and stockpiling goods — although that doesn’t mean companies are embracing increased duties.

“Retailers are doing our best to mitigate the pain, but raising tariffs on thousands of consumers products causes massive disruption to retailers in an already uncertain environment,” Hun Quach, Vice President for International Trade at the Retail Industry Leaders Association, told Supply Chain Dive in an email. She described the deadline as a “black cloud.”

study released Wednesday by Tariffs Hurt the Heartland, a campaign opposed to tariffs, said an increase to 25% would reduce employment by 934,000 jobs and GDP by 0.37%.

Until now, a good deal of optimism has surrounded the U.S.-China trade negotiations, which Bowen said lead some companies to relax a bit and back off of their contingency planning. “They’re making a mistake because they need to be prepared,” he said.

07 February 2019 | Shefali Kapadia | Supply Chain Dive

Supplier cyber risk concerns auto industry

Dive Brief:

  • In a new study by Synopsys and SAE International, 73% of respondents expressed concern about the cybersecurity of third-party providers, yet only 44% said their organization imposes cybersecurity requirements for products from upstream providers.
  • Securing the Modern Vehicle: A Study of Automotive Industry Cybersecurity Practices also found 30% of organizations don’t have an established cybersecurity program or team, and 63% test less than half of the automotive technology they develop for security vulnerabilities.
  • “This study underscores the need for a fundamental shift — one that addresses cybersecurity holistically across the systems development lifecycle and throughout the automotive supply chain,” Andreas Kuehlmann, co-general manager of the Synopsys Software Integrity Group, said in the release.

Dive Insight:

The automotive supply chain is long and complex. A break in the chain at a small, tier 3, single-part producer can be disastrous.

There are plenty of portals and opportunities for “bad guys” to breach security. According to the EY Global Information Security Survey 2018-19, 1.95 billion records containing personal information and other sensitive data were compromised between January 2017 and March 2018, and 550 million phishing emails were sent out by a single campaign during the first quarter of 2018. The average cost of a data breach last year, EY reported, was $3.62 million.

Opportunities do exist for automotive supply chains to protect themselves. One organization, the 3,000-member Automotive Industry Action Group (AIAG), last year released the Cyber Security 3rd Party Information Securitypublication to support industry efforts to protect sensitive data by outlining a unified set of cybersecurity guidelines for automotive trading partners.

Its strategies are based on industry best practices and standards. The National Institute of Standards and Technology (NIST) helped create the document. Also participating were security leaders from General Motors, Ford, Honda and Fiat-Chrysler, with additional input from Toyota, Nissan, Caterpillar, Bosch, Continental and Magna International.

The guide covers such areas as access controls, data encryption, vulnerability management, security audits of suppliers/third parties, data retention and disposal and security investigations. Along with this framework, each original equipment manufacturer (OEM) can take additional measures to increase security of its suppliers and their supply chains.

“Over the course of the past 25 years, we have seen a remarkable shift in enterprise value from tangible to intangible assets. Data is the new currency,” J. Scot Sharland, executive director of AIAG, said when the publication was announced. “As such, more effective command and control of data has become an enterprise risk management priority.”

07 February 2019 | Barry Hochfelder | Supply Chain Dive

Mercedes-Benz Cars seeks to strengthen its supply chain

Mercedes-Benz Cars has said it is advancing its ‘Case’ (connectivity, autonomous, shared & services, and electric) strategy by making its supplier network more international and flexible, and placing greater emphasis on localisation.

In addition to expanding its 2,000-strong global network of suppliers, the German OEM is pursuing a policy of sourcing parts wherever its vehicles are produced, to minimise its vulnerability to political developments such as trade conflicts.

“At Mercedes-Benz Cars, we generally aim to increase the degree of localisation wherever we produce,” confirmed Wilko Stark (pictured), purchasing and supplier quality member on the divisional board. “A central building block for this is the local proximity of suppliers to the production plants, so that parts can be produced and called up almost synchronously with production.

“We are already working with many global partners to achieve this. We give local and new partners the opportunity to position themselves with us internationally,” added Stark.

Using China as an example, the company said it was using approximately 300 local suppliers to date, while the proportion of local sourcing for production at the Tuscaloosa plant in Alabama was higher than was currently required in the US, and the share of locally produced components was scheduled to “significantly” increase in the next five years.

“Growing flexibility in the supplier network is required not only by the transformation to electric mobility but also by volatile markets, by Mercedes-Benz Cars’ wide product range, and by the high variance of ever new functions,” stated the OEM.

“Together with our partners, we have made our supplier network more flexible in order to compensate for fluctuating volumes,” said Stark.

A flexible supply chain is also required to meet the company’s production strategy, as it needs to be able to switch between conventional and electric vehicles. By bundling component orders for conventional and electric vehicles with the same supplier, such as seats or head units, it is possible to react swiftly to customer demand and change between drive technologies. That provides greater planning security for suppliers and for Mercedes-Benz itself, said the OEM.

“Procurement makes a significant contribution to the implementation of the Case strategy,” said Stark.

An example of the importance parent company Daimler puts on procurement was its decision last year to buy battery cells costing more than €20 billion ($22.9 billion) over the next decade as it prepares to introduce 130 electrified variants of Mercedes-Benz cars by 2022.

Mercedes-Benz said it was also looking to sharpen up on efficiency gains through technical innovations developed jointly with suppliers.

05 February 2019 | Steve Garnsey | Automotive Logistics

Dip in rail volume offers reality check for industry

Dive Brief:

  • By all accounts, 2018 was a game-changing year for rail with record-shattering volumes in intermodal along with carload records for chemicals, crushed stone, sand and gravel. Total combined traffic for the whole of 2018 was up 3.5% year-over-year.
  • But a slight 0.69% drop in overall rail volume in December offered a reality check as the year closed. U.S. railroads originated 1.02 million carloads and 1.01 million intermodal units in December, making for the second month of decline after November, which marked the first down-tick in nine months for carloads.
  • The drop is due largely to a nearly 1% decline in carloads and, less so, a 0.43% decline in intermodal shipments year-over-year. Most of the dip in carloads is due to the declining coal industry. Without coal shipments, overall carloads were up 2.5% in December year-over-year.

Dive Insight:

After intermodal rail traffic peaked for the fifth time in six years in October, railroads started to wonder whether intermodal traffic was moving into a new normal of strong growth.

In December, AAR Senior Vice President John Gray said the dip might be a one-off, but he warned economic factors could also be at work. December’s figures aren’t necessarily predictive but do indicate stakeholders ought to heed Gray’s advice and keep an eye on the overall economy, as intermodal traffic is clearly not immune to its swings.

With trucking capacity showing some signs of recovering and continued machinations around trade in Washington, explosive intermodal growth is looking slightly less certain today that it was two months ago.

“What happens in 2019 will depend on how the domestic and global economies hold up and the policies – particularly monetary and trade – that come out of our legislative and executive branches,” said AAR Senior Vice President of Policy and Economics John T. Gray in a statement.

04 February 2019 | Emma Cosgrove | Supply Chain Dive