Business

Hialeah-based company: New tariffs putting our ‘families at risk of financial ruin’

Steve Feig, president of Foreign Parts Distributors in Hialeah, talks about how his company will suffer under tariffs slapped on by the Trump administration.
Steve Feig, president of Foreign Parts Distributors in Hialeah, talks about how his company will suffer under tariffs slapped on by the Trump administration. pfarrell@miamiherald.com

Kevin Feig is staring at a 25 percent price hike on nearly every automotive part his Hialeah-based company sells.

That prospect took the soft-spoken businessman before an August meeting of the U.S. International Trade Commission to advocate for the company — Foreign Parts Distributors — that his father, Steve Feig, founded more than 40 years ago in East Hialeah.

Though he normally dodges public speaking, Kevin Feig felt compelled to voice his concerns about the 25 percent tariffs on $200 billion of imports set to kick in by the end of the year. The tax would likely affect more than 90 percent of the aftermarket auto parts his company sells.

“FPD has over 100 full-time employees, many of whom have been working for the company for decades,” he told the committee. “The effect of all of this would be putting my company and 100-plus families at risk of financial ruin.”

Despite Feig’s impassioned testimony and that of about 300 other speakers, 10 percent tariffs will set in Sept. 24 and move up to 25 percent by the end of the year. About $2.25 billion in products imported to Miami will be affected, including furniture, electronics and cosmetics, according to USATrade data.

This round of tariffs is the third in an escalating trade war with China, the European Union, Canada and Mexico. Previously imposed tariffs affected the steel and aluminum industries and electronic components coming into the U.S. The Trump administration has threatened to impose import fees on an additional $267 billion in Chinese products, which would make nearly all of China’s $500 billion-plus yearly exports to the U.S. subject to tariffs.

During a joint press conference with the Prime Minister of Sweden, President Trump reiterated his plan to implement tariffs on steel and aluminum.

China and other countries have retaliated with taxes on crucial South Florida industries such as the live lobster trade and construction materials. China has also levied tariffs on $60 billion of U.S. imports of clothes, meat and chemicals. Affected industry leaders say that tariffs will drive companies out of business, lead to lost jobs and increase prices for consumers.

Feig is part of an industry involving 535,000 retailers, manufacturers and dealers, employing more than 4.6 million people, according to the trade group Auto Care Association. Most aftermarket parts are sourced in China. If the taxes kick in, Feig said prices will rise on a wide range of parts, such as control arms, bushings and ball joints.

Few dealerships will be affected. Most original equipment parts used at dealerships aren’t from China, said spokespeople for South Florida-based JM Family Enterprises, one of the nation’s largest Toyota distributors, and Kendall’s Williamson Cadillac.

“We use only General Motors original parts in our service center,” said Williamson General Manager Jeff Rodger, “all of it sourced in the U.S.”

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But other local industries expect to take a hit. Tile and furniture are among affected categories, which means local suppliers and furniture companies such as City Furniture will likely raise prices.

Air-conditioning companies — retailers, suppliers, service firms — like Miami’s Refricenter are facing cost hikes, too. Operations Manager Christian Hernandez said his company will likely face a 25 percent price increase on most products.

The biggest impact will be on international sales, he said — about a quarter of his total business.

He’s exploring leasing a bonded warehouse — a way to avoid paying duties on equipment he immediately re-exports. Hernandez, though, is loath to commit to additional costs — money that would be wasted if the two countries reach an agreement and tariffs are discontinued.

“Essentially, the biggest issue is we’re going to pay for a lot of overhead,” he said.

The impact goes beyond companies directly affected. Mechanics, installers, delivery people, packers and workers in other related fields could also see a drop in business.

“What’s bad for our clients is bad for the trade and logistics industry and our company,” said Ralph De La Rosa, president of Doral-based Imperial Freight Brokers. For him, the changes involve costly hours looking for supply-chain alternatives for clients. “There’s pressure on us to find cheaper and better solutions for our clients,” he said.

Uncertainty

From its origin as a small Volkswagen parts wholesaler in a single warehouse in Hialeah, FPD has expanded into a sprawling company employing more than 100 full-time employees and averaging $35 million in sales a year. The firm is the biggest tenant in its industrial park with five warehouses totaling 180,000 square feet.

The Feigs pride themselves on fostering a family-like atmosphere. Julie Sanchez, FPD’s logistics executive, has worked at the company for a decade, taking over the position from her mother, who worked there for two decades. Felix Hernandez, the warehouse manager, has worked for Steve, Kevin’s father, for 40 years. Hernandez was 22 when he started in the warehouse as an hourly worker; he’s now 62. Hernandez and Steve Feig played softball together when they were younger.

Steve is his son’s foil. A stereotypical New Yorker, the 75-year-old is brash and direct. When his phone rings, the theme song from “The Godfather” plays. The headline of a framed story hanging in the company’s office reads: “Feig: Like It Is.”

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Steve Feig, president of Foreign Parts Distributors in Hialeah, talks on Sept. 5, 2018, about how his company will suffer under tariffs slapped on by the Trump administration. PATRICK FARRELL pfarrell@miamiherald.com

These tariffs draw out his trademark bluntness.

“The whole thing is a farce,” he said. “The Chinese aren’t going to back down. There’s nobody that can produce like they can.

“I don’t know what’s going to happen. But if I can’t push off these increased costs to the consumers, we’ll be out of business.”

China is the largest supplier of U.S. aftermarket auto parts and accounts for 90 percent of the Feigs’ inventory. The company has a small army of engineers and employees based in China. He travels there once or twice a year.

Since founding the company in the 1970s, Steve Feig has steered it through multiple recessions and the Carter-era gas crisis that kept cars off the road. But in the company’s decades in business, he has never dealt with import tariffs. It’s new ground, and nothing is certain.

Should he move more of his business to India? Research and development would take years. Establishing an office and staff would cost hundreds of thousands of dollars. What if the tariffs last only a few months? All that money would be lost.

And what about his competitors? National auto parts chains in the U.S. could just bypass his company and buy directly from China to cut costs. Competitors in Mexico or Turkey could poach business away from FPD.

Twenty percent of the business involves exports to Latin America. FPD has been able to avoid tariffs on those exports through a mechanism called drawbacks, but he worries about Canadian competitors who could use the same mechanism to send goods into the U.S. duty-free. At risk, say the Feigs, are millions of dollars — possibly even their entire company.

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Kevin Feig, vice president of Foreign Parts Distributors in Hialeah, points out products and their ultimate destinations in a company warehouse on Sept. 5, 2018. Kevin and his father, Steve Feig, the company president, talked about how their business will suffer under tariffs slapped on by the Trump administration. PATRICK FARRELL pfarrell@miamiherald.com

What is certain is that prices will rise. That, in turn, will hit people who need to fix their cars.

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