September 23, 2018
Business Latest News | Poll Questions | Opioid Deaths | Brett Kavanaugh | Fall Hikes

Maine seat maker braces for another round of tariffs

Courtesy of Ron Bilodeau
Courtesy of Ron Bilodeau
Hussey Seating Co. President and CEO Gary Merrill with some of the steel components fabricated at the company's North Berwick manufacturing facility.
By Lori Valigra

Hussey Seating Co., which already is feeling the bite of earlier Trump administration tariffs on steel and aluminum imports, expects some of its upholstered seats to be hit with an impending third round of tariffs against China.

Should the new tariffs on upholstery go through, which President Donald Trump said last week could be any day now, they could add another 10 percent to 15 percent in cost to Hussey seats, depending on the product.

“The tariffs will be a hit on the bottom line. They will reduce the amount of money we have to reinvest in equipment and product development to maintain our competitiveness,” Hussey President and CEO Gary Merrill said.

Maine’s congressional delegation is trying, at the North Berwick company’s request, to remove the parts it uses from the pending tariff list. On Sept. 6, the group wrote to U.S. Trade Representative Robert Lighthizer, asking him to exempt three product categories. The company imports some upholstered seat parts from a contract manufacturer in China for its stadium and auditorium seating for sports and school venues .

The letter is signed by U.S. Rep. Chellie Pingree, D-Maine; U.S. Sen. Susan Collins, R-Maine; U.S. Rep. Bruce Poliquin, R-Maine; and U.S. Sen. Angus King, I-Maine. The four in June talked to USTR staff in an effort to protect lobsters from tariffs.

“Further measures like this proposed Section 301 [tariff] action will hurt Hussey’s ability to compete because the custom molds and tools they use to make their products exist only in China,” the representatives wrote.

“To relocate or replicate these products will cause Hussey to incur higher costs as it locks in half of its contracts well before beginning new projects,” they said. “Subjecting key products to new tariffs will disrupt its supply chain and cause irreparable harm to its long-term standing in its industry,”

Merrill said he had approached all four Maine U.S. congressional leaders to make them aware of the impact of the tariffs on small businesses in Maine.

Hussey, a 183-year-old family-owned company, conducts its engineering and design work in North Berwick, and intends to keep it there, regardless of the tariffs, Merrill said.

He would not comment on how much the tariffs have affected the private company’s bottom line, but said he expects a ding in profits in the company’s fiscal year ending next March. He said the company still will be profitable and has no layoffs planned.

Its revenues are about $100 million, and it employs 300. Merrill said Hussey is looking to hire five to 10 people. The company’s major markets of K-12 schools and colleges and universities still have the funding to buy seating, though renovation projects are slowing and some construction projects are being delayed.

Steel, aluminum tariffs eat away at profits

The company wasn’t affected by the first two rounds of Chinese tariffs put in place to retaliate against U.S. tariffs. It has, however, seen a profit decline because of retaliatory steel and aluminum tariffs. The United States imposed a 25 percent tariff on certain imported steel and 10 percent on aluminum on June 1. The company uses both products in its seating.

Among those retaliating is Canada, a source of some of the steel and aluminum for Hussey’s seats.The company also buys steel from U.S. suppliers.

“When the steel tariffs were imposed, almost immediately domestic and international sources went up at least 25 percent,” Merrill said of the cost of steel. Add another 10 percent rise because of the shortage of long-haul trucks to deliver products and 5 percent for fluctuations in commodity prices, and the total price per seat rose 35 percent to 40 percent since last November, Merrill said.

Merrill said domestic steel suppliers also added 25 percent to their prices as soon as the 25 percent tariffs for Canadian steel imports went into effect. But the biggest effect so far has been on orders priced far in advance of the tariff threat.

“The biggest impact is on the about 50 percent of annual revenue sold months before to schools and universities around the country,” he said. “We estimated costs to them not anticipating the increased tariff costs. That had a significant impact on our bottom line.”

The company has been increasing prices to customers, and expects the tariffs to be in place for the long haul, until it hears a difference in the political rhetoric, Merrill said.

Hussey currently is quoting seats for delivery in the summer of 2019 and trying to forecast prices for steel and aluminum and other components six to 12 months ahead of time.

“It’s very difficult,” Merrill said.

The company ships globally. About 98 percent of its sales are outside Maine, with 80 percent to 85 percent in the United States and 15 percent to 20 percent internationally.

Hussey, which has two U.S. competitors in Michigan and international competition, already is seeing some increased competition from Canada, whose local seat makers are not subject to the 25 percent steel tariff and that ship complete products. Their lower cost seats are starting to show up in the United States as competition, Merrill said.

“Canada is not subject to the tariff and the Canadian dollar’s value has decreased because of the tariff. So their manufactured cost is a lot less than ours,” Merrill said.

Follow the BDN Business Page on Twitter @BDNbiz.

Follow the Bangor Daily News on Facebook for the latest Maine news.


Have feedback? Want to know more? Send us ideas for follow-up stories.

You may also like