Steve Wybo: Auto suppliers at risk for earnings turbulence as steel tariffs go into play – Debtwire
Steve Wybo was featured in Debtwire’s article titled “Auto suppliers at risk for earnings turbulence as steel tariffs go into play.”
Despite widespread uncertainty as to which way the pendulum will swing when it comes to the future of the trade policies, for now there is a consensus that equipment prices will go up along the supply chain, from the tier three, two and one suppliers to the OEMs, said Steven Wybo, senior managing director at Conway MacKenzie. “If you are not adequately hedged with your customers and buying steel on the spot right now, you are definitely feeling the burn,” he noted.
“Domestic volumes of car sales have flat-lined a bit so you aren’t seeing revenue increase and can’t increase price because of competition so where’s the growth going to come from?” Wybo noted.
The slight decrease in sales is partly due to consumers choosing to hold on longer to their cars as well as the industry reaching its peak in 2016, he said. People are also now shifting from buying sedans to SUVs, Wybo added.
Adding on a further component of distress, interest rates have been steadily climbing up since the end of 2015 and are expected to continue in the near future, increasing the cost of capital, said Wybo.
“If interest rates go up, then affordability goes down. As cost of capital goes up, it impacts the working capital for the business,” he said.