“You think you're gonna break up. Then she says she wants to make up.” Those lyrics from the 10cc song, “The Things We Do for Love,” seem appropriate to the recent North American and global trade environment.
I’m looking at the automation market and how the talk of tariffs is affecting pricing and availability of products. The proposed cross-border tariffs could affect projects now and in the future.
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Let’s face it: most automation products are not made in the United States, which suggests that most imported automation product will cost more due to potential import tariffs. Also remember that all automation products must be certified by agencies like Underwriters Laboratories (UL) and Canadian Standards Association (CSA).
Not too long ago a chip maker discontinued a chip set that was used in a vendor’s drive family. A re-design had to be accomplished, and re-certification had to be done. To create new product is not a simple process. Existing products must be used in the short term. They have to be affordable and available for projects to proceed.
I am reminded of a time in the early 1980s when our office received a shipment of analog input programmable-logic-controller (PLC) modules. It wasn’t supposed to go to us directly, but it did.
The invoice inside charged the Canadian entity something like $230. The customer in Canadian dollars were being charged in excess of $2,400. Why was that? The answer is unclear, but it seemed that the Canadian entity took the tax hit on the profits instead of the U.S. vendor.
So, the gamesmanship of business has back doors and deals that most don’t know about. But what we do know is that, based on the amount of automation business, there isn’t a lot of room for errors in dollars.
Budgets and project costs have already been determined, and one wonders how current projects might be affected. Stellantis has already put the brakes on a $1.3 billion dollar retooling project in Brampton, Canada, based on the disruptions that may be occurring.
So, stability of trade in project costs has to be top of mind. Every industrial project has components of automation and robotics. Any unforeseen cost increase can put the project in jeopardy. Moving the manufacturing of automation components back onshore will take a huge investment in dollars and time, which is not practical in the short term.
"Let’s face it: most automation products are not made in the United States, which suggests that most imported automation product will cost more due to potential import tariffs."
Partnerships have been crucial to the sustainability of products in our industry. Chips, boards and semiconductor devices have to be reliable and cost-effective for the vendors to use in their products. Costing for the user must be consistent.
In talking with a custom machine builder about the challenges that face them, it was clear that it was confusing. There are many moving parts to a project.
Steel, aluminum, wiring/cabling and devices are all needed to make up the hardware of the machine. The cost of the machines, such as a headlight assembly and test line have hard and soft components.
There is also the cost of labor, installation, commissioning and software that adds to the cost of the machine. There may be a workaround by elevating certain costs to soft costs, so the tariffed hard costs could be reduced.
Global companies that build catalog type machines, such as a high-pressure injection molding machine, would be tariffed on the catalog cost, which is like buying a light bulb. The cost is the cost.
That project cost would be negatively affected, and maybe that project loses its viability due to the increased costs.
Part of the argument against restrictions and disruption is that assembly plants on both sides of the border perform a singular function. From a piece of steel, a windshield wiper motor mount is made, and it may go back and forth across a border multiple times. Each time the increased value of the part gets additional costing, which ramps up the cost of this one component by orders of magnitude, not just on the finished good cost.
Automation projects will be in for a cost rise based on these trade barriers, which may force the use of inferior products that may be used in applications they weren’t designed to do. A “do with what you have” mindset may create more headaches. It’s all about the money.
So, break up already. Or don’t. We need stability in our automation world.
