Thomas Koval
Appearances
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
It's a very unpredictable time right now, and it's a very, very tough time. We don't know where these tariffs are going to go, so we're going to have to deal with that. But the question is, how long will it last for? So a company like ours, we've built up inventory to try to see if this is only going to last for two weeks, we're going to be fine. But after that, what happens?
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Instability. Not panic or... There's probably a lot of panic at the moment as well. But now that it's real, I'm sure that there's definitely some panic as well.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I've actually worked in automotive industry my entire life since I was 16 years old. I started working in factories in Germany and I'm originally from Sweden. I'm a big fan of Detroit and I'm a big fan of the auto industry.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
My name is Thomas Koval. I am the CEO of Leggera Technologies. I live in Rochester, Michigan, not far from Detroit, the center of automotive industry.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
All our production is in the U.S. However, we do have material coming in from other countries. We have material coming from Mexico.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
As soon as we heard he was going to do the tariffs, we kind of went into a little bit of a war room scenario where we're planning out inventory levels. Can we do bonded warehousing? What are some of the solutions? Because ultimately, we don't want to impact the customer. But the reality is when we look at it now, we're going to have to have some serious discussions with our customers about this.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
This is a pretty significant price increase.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Yes, that'll happen. We will try to do whatever we can to mitigate that.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
We are looking at all solutions that work best for ourselves and for the customer and for the supplier. And I know that sounds like a very political answer, but that's the truth. It's not so easy. So the truth is, say we wanted to work with our supplier and bring them back up to the United States. It's one thing to find the shop floor space and actually build a bank and move the lines.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
But you also have to do something called a PPAP. You have to make sure that the product that's coming out of the new plant has been tested and verified. Cars are, of course, a safety product. So they go through rigorous testing and this takes time.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Yes. So you eat 10 cookies a day. So I produce 10 cookies a day. But now I'm going to have to shut down production because I'm going to move my lines to the United States for 10 days. So I have to build up on Saturdays and Sundays, which is overtime and costs money. I'm going to have to build up 100 cookies, preferably 130, because who knows, something might go wrong through the process.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
So I have to build up a bank of cookies until I start production back up again in the U.S.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
Wow, that's a good question. It all depends. If you're able to build a bank, then potentially you can just spend about, I don't know, $500,000 to $1 million to bank that material and move it up. But if you have to buy new tools and new equipment, depending on whatever commodity that you're in, it could be somewhere from $100,000 to, I don't know, $10 million, something like that.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I do understand the rationale behind the tariffs. And I really do believe in U.S. manufacturing. And I want to bring more business here. I just wish there was two ways that it was done a little bit differently. One, a longer and better timeline to prepare. And I would say also from the standpoint of it's quite punitive instead of say motivating.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
And whether you want to use carrot or stick, I guess it's my nature. I like to use carrot. I feel as this is more of a stick scenario.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
So if I could ask Mr. Trump one thing, I would ask for more stability for the auto industry. So I understand the tariffs. Just wish that it could be, say, more of a motivating standpoint, more of this carrot versus stick scenario and allow for a little bit more time. I want to see tool makers, dye makers, machine builders, more manufacturing in the United States. I think it'll make us stronger.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
So if I could ask for something, it would be a bit more time and a clear plan and hopefully some type of agreement between the Democrats and Republicans of how do we want to handle industry in the United States. But that's, I think, is maybe too much to ask for.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
I'm feeling uncertain, but the one thing that I will say is with automotive, with manufacturing, with Detroit, very, very gritty, hardworking people. We've been through this before. I think hit from left to right for the last couple of years and we've been able to survive. I know that we will survive. I'm very positive.
The Journal.
Trump's Tariffs Cause Chaos in Auto Industry
But instead of being able to focus on developing and making our business more efficient with cool technology such as AI and machine learning and spending our money towards that, the industry is absorbing that money into dealing with having to hold more inventory and moving lines and things like that. So that's the sad part about it.