interviewed LevaData's Richard Barnett on the impact of the USMCA on the automotive industry. The results of our survey of leaders in the industry are put into the context of the legislation and its terms. One of the key points was the impact of the $16 proposed production wage under the USMCA. For the United States and Canada, average production wages already exceed the minimum. However, Mexico would need to substantially raise wages to comply with the agreement which would raise costs across the board. Automotive leaders seem to agree that most of the increased production costs will end up being passed on to consumers. However, a large majority of leaders feel that the agreement will have a positive effect on long term company growth. They feel that the decreased uncertainty for the industry is worth the increased production costs.

With regard to how companies plan to mitigate cost increases, the strategic focus is on renegotiation with suppliers and finding cost savings in production. Increasing pressure to remain competitive with higher costs will force sourcing strategists to adopt new methods so they don’t fall behind. The method of choice seems to be cognitive sourcing, taking advantage of augmented intelligence to drive superior cost savings. The coming reconstruction of the automotive supply chain, and the impact of trade negotiations with China, will require this type of strategy to sense risks and opportunities and to act on them quickly and effectively.

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