The bridge bottleneck hurting America’s auto industry

Peter Dawson (pictured) of the 831(b) Institute warns of the issues surrounding the delayed opening of the Gordie Howe International Bridge.

Tariffs, trade wars, and political wrangling: these themes continue to play out across the country, most evidently today in Michigan and the automotive industry. Reports estimate an economic fallout of $6-7 million each week that the delay in opening the Gordie Howe International Bridge continues. All eyes continue to be on the negotiations surrounding the trade deals and bridge opening in Michigan. 

While the delayed opening affects numerous industries on both sides of the US-Canadian border, those of us in the automotive industry have been hit especially hard. Michigan is the national leader in automobile manufacturing, producing roughly one in every five vehicles made in America. This, in large part, is effectuated through collaboration with our neighbours in Ontario, Canada. For example, many automotive components such as engines and transmissions will cross the US-Canadian border seven or eight times during the manufacturing process, before the final assembly concludes in Michigan. At the moment, the Ambassador Bridge in Michigan is the only point of entry for these parts to cross over – creating a bottleneck in the supply chain. Gordie Howe is supposed to relieve this pressure, but the ongoing delays seem to only create more problems. 

Amid the ongoing trade negotiations between the US and Canada, these continued disruptions to the delivery of these goods are placing unnecessary strain on the market. This in turn, forces those in the supply chain to either foot the bill or pass the increased costs on to the consumer. Thankfully, there is an innovative solution many of us have begun to utilise in order to stabilise the market costs and prevent further disruption in an already difficult and costly environment. 

It is becoming more common for car dealerships to implement micro-captive insurance plans to offset the costs political changes and supply chain disruptions have on the industry. These plans are a form of self-insurance made accessible to small businesses under Section 831(b) of the Tax Code, allowing companies like car dealerships to set aside pre-tax dollars to protect against fortuitous risks. 

These alternative insurance options are increasingly necessary in the current political, economic, and insurance climate. Small businesses are facing unprecedented disruptions due to a rise in natural disasters, supply chain disruptions, political policy changes, and trade negotiations. This while traditional commercial insurers are either unable or unwilling to insure against these risks. Through the implementation of micro-captive insurance plans, small businesses have successfully taken risk management strategies into their own hands, allowing them to stabilise costs regardless of the disruption and without negatively impacting their sales prices. 

However, it is more than the business and the consumer who benefit from these plans. In addition to the robust risk management approach for small businesses, these plans also provide greater economic stability in the industry by limiting price fluctuations and allowing political leaders the flexibility to negotiate without the fear of disrupting market prices. This in turn reduces the growing strain placed on traditional insurers who have been unable to tailor individualised policies to keep up with the increasingly dynamic risks small businesses are confronting. It is a win-win-win proposition for the American economy. 

Unfortunately, for too long these plans have been inaccessible to the average small business owner because of the extensive and complicated area of the Tax Code. We call upon our representatives in Congress to clarify the language in the Tax Code and provide clear policies and regulations related to micro-captive implementation and management. It is another powerful tool needed to help keep small businesses open and ensure prices stay competitive globally. 

Peter Dawson is an 831(b) Institute advisor and CEO of Dawson LLC.

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