How tariffs threaten an American manufacturer’s big investment in Mexico
Subscribe to enjoy similar stories. More than a decade ago, the off-road vehicle maker Polaris surrendered its status as a 100% made-in-America company, gambling that it could add a Mexican factory without alienating customers. The move paid off handsomely.
Buyers didn’t flinch as the plant, located in Monterrey, churned out more than 22,000 vehicles in its first year, helping to expand the company’s sales 33% while saving millions of dollars in costs. The factory has since become Polaris’s largest, producing such models as the RZR, a dune buggy-like vehicle that starts at $16,000 and can reach over $40,000. Now the plant could become a liability.
President-elect Donald Trump has vowed to levy a 25% tariff on all goods coming from Mexico as retribution for what he described as the country’s lax efforts in stopping drug smuggling and illegal immigration. For Polaris, which has added engine-assembly and injection-molding facilities to its Monterrey operations, the new duties could create $400 million in costs that would be passed on to consumers, according to David MacGregor of Longbow Research. The higher prices would come as Polaris faces weaker demand for its products, as well as $70 million to $80 million in tariffs for Chinese components used in its U.S.-made vehicles.
The company has argued that those tariffs, put in place during Trump’s first administration, are an unfair burden because its top competitors don’t manufacture in the U.S. Speaking at an investor conference Wednesday, Chief Executive Michael Speetzen said Polaris is reviewing its sourcing but otherwise is waiting to see what happens. “We’re not going to spend a lot of energy trying to worry about what could be," he said.
Read more on livemint.com
