WASHINGTON – The Trump administration's threatened tariffs on imported autos and auto parts could put a crimp in Sumitomo Rubber North America's continuing expansion of its U.S. tire manufacturing plant, which occupies the former Dunlop Tire facility in the Town of Tonawanda.
That's the message Richard Smallwood, CEO and president of Sumitomo Rubber North America, brought to a Commerce Department hearing on the proposed tariffs Thursday.
"If the tariff costs are not passed on to our customers and consumers, it will reduce the amount of funding available for us to invest in new production facilities or to hire new personnel," Smallwood said at the hearing.
Smallwood's testimony came after he gave an interview to The New York Times, published Thursday, in which he said more specifically that tariffs could stand in the way of the company's plans to quadruple production at the Western New York plant by 2020.
“It just leaves less money for us to invest in modernizing our plant here or hiring new people,” Smallwood told The Times.
In Smallwood's view, auto tariffs could stall one of the Buffalo area's greatest recent manufacturing success stories.
The Town of Tonawanda plant now employs more than 1,000 unionized workers, along with 400 salaried employees, up from about 900 unionized workers and 200 salaried employees in October 2014, said Thomas O'Shei, president of Steelworkers Local 135, which represents manufacturing workers at the plant.
"I'm not sure what to think about this," said O'Shei, who has not heard from management about its concerns about the possible tariffs. "I think the uncertainty here is the big concern everybody has."
Smallwood's recent comments make for the first negative sign regarding the resurgent Town of Tonawanda plant since Sumitomo took full control of it four years ago after dissolving a partnership with Goodyear Tire and Rubber Co. that previously ran the facility.
Sumitomo, which is based in Japan, announced in December 2016 that it would spend $87 million at the Town of Tonawanda plant to vastly expand tire production there.
That expansion is already well underway, but Smallwood said at the hearing that tariffs "would undermine the significant investment that Sumitomo Rubber has made in its U.S. manufacturing operations."
The hearing stemmed from President Trump's May request that the Commerce Department consider studying auto, truck and auto parts imports "to determine their effects on national security."
Under Section 232 of the Trade Expansion Act of 1962, the Commerce Department can investigate the national security implications of product imports and recommend tariffs. That's what the Trump administration has done in imposing tariffs earlier this year on imported steel and aluminum.
The auto industry is pushing back hard on proposed tariffs.
The Alliance of Automobile Manufacturers, which represents Ford and General Motors as well as foreign automakers such as Toyota and Honda, testified against the tariffs at Thursday's hearing.
General Motors – which, like Sumitomo, has a manufacturing facility in the Town of Tonawanda – said in a letter to the Commerce Department last month that tariffs could lead to "less investment, fewer jobs, and lower wages for our employees."
The industry-backed Center for Automotive Research Thursday released a study that said tariffs could increase the price of new vehicles anywhere from $980 to $4,400.
"Tariffs will hurt our business and will hurt our customers," Smallwood said in his testimony.
Word of the possible slowdown at the Town of Tonawanda facility outraged Rep. Brian Higgins, a Buffalo Democrat whose district includes the plant.
Higgins said he would contact Sumitomo to get more details about its concerns, and also look into sponsoring legislation that would strip the Trump administration of its ability to cite national security concerns as a reason for tariffs.
"You can't tariff your way to economic growth," Higgins said. "Tariffs just cause other countries to respond with other tariffs," thereby increasing costs all around, he added.
That's not the way Trump sees it. He has threatened tariffs of up to 25 percent on imported autos, all in hopes of boosting U.S. manufacturers.
"Core industries such as automobiles and automotive parts are critical to our strength as a nation," Trump said upon proposing the probe into whether auto imports pose a national security concern.
Smallwood doesn't seem to get Trump's logic.
"I just cannot see how Sumitomo Rubber's engagement with the United States, both through U.S. investment and imports, can have any conceivable negative impact on national security," Smallwood said at the hearing.