The automotive industry has always experienced dramatic changes resulting in large boom and bust cycles caused by changes in consumer preferences and other economic factors such as interest rates, oil prices and globalization. Today the industry is experiencing near record volumes and the economy as a whole is humming along at full employment with little inflation, still relatively low interest rates, and low oil prices which appear to be relatively stable. However, cracks in the pavement are emerging. While most experts predict only a small decline in volumes for the next few years, interest rates are rising as are material costs and labor rates. Auto industry factory utilization has declined from 93 percent in 2015 to 82 percent this year. The impact of tariffs is uncertain. Add to this 40 product launches scheduled for 2019 with more to follow as the industry adapts to the American consumer preference for cross-overs over sedans. With the large number of used vehicles coming into a market that has absorbed over 17 million new cars per year for several years, one can anticipate disruption occurring throughout the space. Finally, the long running U.S. economic expansion is anticipated to end sometime in the next two or three years, and this will certainly impact sale volumes, possibly more than currently anticipated.
The industry is also facing structural changes that signal more than the historical down cycle. The need to change from combustion engines to electric will require complete changes in platforms, drive trains, and sources of supply, not to mention the impact on the service industry. Additionally, the change from the notion of the industry as providing cars to be owned to the notion of the industry providing the service of mobility coupled with individualized amenities while traveling from point A to Point B. When the anticipated (albeit unproven) demand for driverless vehicles, controlled by computers subject to cyber threats is layered on, it becomes clear that fundamental disruptive change has begun.
For decades, McDonald Hopkins has been actively engaged in the issues faced by those in this volatile industry and we have been preparing for the upcoming structural change. Our strategic position in the Midwest gives us unparalleled proximity to suppliers and manufacturers that are the lifeline of your business. We speak your language and understand the issues of the industry, including the specific issues relating to OEM requirements, suppliers, dealers, creditors, employees, vendors, advisors, media, and government officials.
As a business advisory and advocacy law firm, the scope of services McDonald Hopkins provides to automotive industry clients is vast. We help clients plan for uninterrupted supply, deal with customers to address sudden increases in costs, negotiating contracts and disputes without litigation, litigating disputes when it’s the best option, protecting intellectual property and manufacturing processes, protecting business interests and assets, managing workforce issues and high level labor relations and multiemployer and defined benefit pension plan issues, creating compensation and benefits plans for management and employees, addressing tax and finance issues, put together succession plans, and deal with cyber security. We bring together the talents and passions of a unique group of attorneys who can guide you down difficult paths and help you achieve your short and long-term business goals, whatever they may be.
Our automotive team works with a multitude of suppliers and others dependent on the industry on a daily basis, providing consulting and legal support for practically every aspect of the automotive supply chain. We are often brought into difficult situations before there is a crisis and assist our clients in successfully navigating potentially explosive situations with a careful, reasoned, and proven approach.
The McDonald Hopkins team also regularly provides behind-the-scenes legal support to purchasing and sales departments for contractual negotiations, providing assistance to best position clients both legally and commercially.
Sometimes contracts that seemed favorable at the time they were entered become less favorable as time goes on – whether because of changing demand combined with increased or decreased volumes, commodity pricing issues, unreasonable customer or supplier demands, or a multitude of other issues. Whatever the reason, our team has the experience needed to provide insight and solutions to your unique situation. In these cases, identifying your commercial goals and putting in place a strategy to achieve those goals is always of the upmost importance.
We also provide pre-litigation advice and support for almost every issue experienced by manufacturers in the automotive and other industries, including:
- Potential supply interruptions
- The need to resource supply from a recalcitrant supplier
- Recall exposure
- Customer and government inquiries regarding supplied parts and assemblies
- Capacity limitations
- Tooling and equipment issues
- The need to revise existing lending terms, refinance existing debt with current or new lenders (traditional or non-traditional sources), or find additional debt and equity opportunities
- HR and workforce issues
- Multiemployer pension plan withdrawal liability
- Cybersecurity issues
Unfortunately not all issues can be resolved without litigation. When litigation is inevitable and/or necessary, our team has decades of experience in the automotive and manufacturing industries.
McDonald Hopkins deep understanding of these industries, specifically matters involving manufacturing and supply chain clients, helps us to understand and effectively solve your litigation issues. We have experience assisting automotive clients with a wide range of litigation throughout the U.S. From commercial law to employment litigation to the nuances associated with the multitude of contract forms in the automotive industry, we work closely with you to solve disputes. Plus, while providing legal advice is our primary function, we also recognize there are difficult business realities and relationships involved in your business.
We are prepared to act quickly and effectively when your production or supply chain is a risk. We have been involved in litigating hundreds of disputes, distributor agreements and accommodation agreements.
Our attorneys also handle disputes related to the quality of goods and recall litigation, tooling disputes and virtually every other aspect of litigation in the manufacturing sector. The following is a very small representative summary of matters handled by our attorneys. Overall, the McDonal Hopkins team has been involved in hundreds of similar cases involving these common industry issues.
McDonald Hopkins also has considerable experience working on automotive restructuring issues. Both in helping the troubled supplier navigate rough waters and assisting the customers of troubled suppliers in mitigating the risk to their supply chain through resourcing or other means. No two matters are exactly alike, but with our deep well of experience, we know how to help clients spot trouble early and wisely counsel on the options available to get through difficult times.
- Successfully represented a brake manufacturer in a multi-million dollar supply dispute related to defendant suppliers’ effort to terminate contract due to higher commodity pricing for friction materials.
- Obtained an injunction requiring defendant supplier to continue to ship fasteners at agreed pricing despite dramatic increase in steel prices.
- Successfully enforced contractual terms requiring defendant supplier to timely ship automotive interior components to avoid shutdown of an OEM assembly operations.
- Successfully defeated a claim for injunctive relief brought against Tier II plastics supplier client by demonstrating that purchase order was not a requirements contract and, therefore, client had no further supply obligations.
- Defended multi-million dollar warranty recall claim against a supplier by an OEM related to recalled hub and wheel bearings.
- Successfully defended defective product claim seeking recall costs related to drive-by-wire sensors utilized on heavy trucks.
- Successfully defended a claim for breach of contract relating to MRO indirect materials from Suppliers, including performance metric issues and shipping and receiving issues into North American plants.
- Successfully pursued claims for breach of NDA and disclosure of confidential and propriety information to competitors relating to a new design which removed weight from a component part.