The company is currently racing around Asia to find a manufacturing partner elsewhere. Photo/Washington Post.
The company is currently racing around Asia to find a manufacturing partner elsewhere. Photo/Washington Post.
Cedar Electronics has been selling CB radios to American truckers since the 1960s, helping connect the workers who keep the U.S. economy rolling. But these days Cedar's business isn't exactly trucking along.
The Chicago-headquartered company is racing around Asia looking for other countries to host its manufacturing, after the radios Cedar makes in China and brings to the United States were hit with one of the Trump administration's 25 per cent tariffs this summer, making them more expensive to import.
The White House's decision to extend its tariff campaign to an even broader range of Chinese imports starting Monday is putting similar pressure on more U.S. companies to uproot their Chinese manufacturing, and to consider layoffs, price hikes and investment cuts.
"We are looking as fast as possible to find an alternative [manufacturing] place, but we're dealing with a very unstable situation," said Cedar vice president Mark Karnes, referring to President Trump's penchant for issuing policy decisions by tweet. He added: "As a business, my government just clubbed me over the head."
Mark Karnes, vice president for strategic planning and business development at Cedar Electronics, says the tariffs clubbed him over the head. Photo/Washington Post.
The Consumer Technology Association alone has heard from hundreds of U.S. member companies hurt by the levies, many of which are small businesses ill-equipped for this sort of tumult, said Sage Chandler, vice president for international trade at the lobbying group.
"Eighty per cent of our companies are small and medium enterprises," she said. "They don't have trade experts on staff. They don't have customs people on staff."
More than 80 industry and agricultural groups this month backed a multimillion-dollar campaign, "Tariffs Hurt the Heartland," to oppose the White House effort. The groups are holding town-hall events and running advertising arguing that the tariffs are causing job loss and higher prices for consumers.
Sellers of consumer electronics and appliances are in a particular bind. Many shifted their manufacturing to China years ago to take advantage of lower labour costs. As manufacturing grew in China and withered elsewhere, China became the sole source of parts for some products, making companies more reliant on the country.
Scosche Industries, an Oxnard, California, seller of car-stereo accessories and other electronics, manufactures 95 per cent of its products in China, according to chief executive Roger Alves, who co-founded the company nearly 40 years ago in his garage.
The company in recent weeks has dispatched employees to look for new manufacturing in Taiwan and Vietnam after the Trump tariffs hit some Scosche products, Alves said. Scosche needs to find an existing factory it can contract with to do the work because it can't afford to build one from scratch, he said.
The company isn't considering moving production to the United States because labour costs are too high, and there isn't enough manufacturing capacity to make Scosche's products, he said.
Scosche is also attempting to negotiate price increases with retailers now that its goods are more expensive to import, but it is in a vulnerable position with big-box stores that drive hard bargains, Alves said. "If they don't like our pricing, they'll invite someone else to compete," said Alves, who employs 190 people in the United States. "Our argument is it's not an arbitrary price increase: It's a mandate from the government."
Cobra Electronics has been an established brand since the 1960s. Photo/Washington Post.
Cedar Electronics' predecessor company was the first to introduce CB radios to the market decades ago. "We like to joke it was the first social media device," Karnes said. The radios, made famous by movies like "Smokey and the Bandit," are still used by many truckers, despite the advent of cellphones.
Steven Fields, a trucker based in Kansas City, Missouri, said he uses a CB to warn other drivers about bad weather and accidents. "Being prepared can make a big difference between a miserable trip and a safe trip," he said.
About 15 years ago, Cedar moved its manufacturing to China to save money on parts and labour, Karnes said.
Cedar imports almost all of its Cobra-brand CBs to North America, where it holds almost 80 per cent of the market. The radios are mostly sold at large truck stops, for US$99 to US$199 (NZ$148-298), depending on the model.
When Cedar learned its CBs would be included on the initial tariff list targeting US$50 billion in imports, it applied for an exemption and imported additional inventory by costly airfreight to have stock on hand before the tariffs took effect. That gave the company enough CBs to meet demand through September without having to raise prices, Karnes said.
As the weeks wore on, the company's other products, including its dashboard cameras and portable power packs, were also hit by 25 per cent tariffs as the Trump administration widened its attack on Chinese imports. Cedar is planning to request exemptions from those levies, too, but realized it had to start planning for the possibility that the tariffs were sticking around, Karnes said.
Some of the manufacturers Cedar works within China have factories in Singapore, Malaysia and Taiwan, so Cedar started asking whether it would be possible to shift to those facilities. Those discussions are still unresolved, Karnes said.
In case its Chinese partners are unwilling to move production, Cedar also started combing Vietnam and other countries for manufacturers, he said. Moving to the United States isn't an option, Karnes said, because China is the only supplier of most of the parts used to make Cedar products, and many of those parts have been hit with US import tariffs, too.
The company estimated it would take about two years and cost millions of dollars to move each product line to a new facility outside of China: to set up new machinery, buy new parts and secure approvals from the Federal Communications Commission and regulators in other countries, which certify new products.
Cedar also recently began talking to its retailers, including truck stops and sporting-goods stores, about the possibility of raising prices after its current pricing agreements expire at the end of the year.
The retailers are "sympathetic, but they do warn us they have other options," Karnes said. "If our products become too expensive, [the retailers] are likely to lose business." Cedar's competitors manufacture their CBs in Vietnam and Japan, so they haven't been hit with the tariffs and can hold their prices steady, Karnes said.
Cedar employs about 150 people in the United States - most in corporate, engineering or warehousing jobs in Chicago, but also some in West Chester, Ohio, where the company makes its high-end radar detectors, which are custom installed in cars. The parts for those products also come from China and now carry a 25 per cent tariff.
"Unless we can find relief, we will have to take drastic measures. It could mean job loss; it could mean cutting investment in new products," Karnes said.
