Major North American suppliers are reducing engineering and R&D spending and cutting thousands of jobs to support profit margins as they anticipate weak new-vehicle sales growth and electric vehicle sales uncertainty.

Lear Corp., for example, cut about 15,000 jobs worldwide in 2024, a figure it expects to match in 2025.

“The actions we are taking will continue to improve efficiency in our operations,” said Lear Corp. CEO Ray Scott during a Feb. 6 conference call with investors.

The days of suppliers touting huge investments in engineering and retooling plants for EV parts production are over. Today, it’s become more fashionable for suppliers to find ways to save money in a highly uncertain market, and to prioritize free cash flow and shareholder returns.

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Suppliers including Lear, Dana, Magna International and BorgWarner have detailed layoffs, factory closures and spending cuts in recent months. Companies have pointed to potentially weak new-vehicle sales growth, lower-than-expected EV production and high labor costs as reasons.

The moves also come as suppliers brace for potential U.S. tariffs on Canadian and Mexican imports and higher duties on steel and aluminum, each of which are scheduled to go into effect in March. Suppliers have warned that tariffs could further reduce new-vehicle demand and raise volatility in vehicle and parts production.

Wall Street rewards Dana for cost-cutting plan

Some companies are being rewarded on Wall Street for their efficiency plans, none more so than Dana. Shares in the Maumee, Ohio, supplier have risen nearly 40 percent this year, thanks in part to plans outlined in January to reduce costs by $300 million through 2026. About $175 million is expected to come this year.

A “large portion” of those savings are related to shifts in the company’s EV strategy, CFO Timothy Kraus said on a Feb. 20 call with analysts. Dana anticipates spending less on capital investments than in previous years, and it expects its automaker customers to provide it with more financial offsets to cover those costs in 2025, CEO Bruce McDonald said.

“2025 for us is going to be a transformational year,” he said, pointing to the cost savings and the sale of its off-highway business. The moves will enable Dana to “return capital to our shareholders and be left with the best-in-class balance sheet in our space.”

McDonald was appointed CEO of Dana on Nov. 25, replacing James Kamsickas. But drastic changes are also being pursued at companies with long-time leaders at the helm.

Lear, Magna, BorgWarner detail cuts

Lear, for example, is moving ahead with an aggressive plan to automate its plants and decrease head count. The 15,000 jobs it slashed last year, most of which were outside the U.S., resulted in about $150 million in annualized savings, Lear said.

It closed or sold 13 factories in 2024 with plans to unload five more in 2025, all while boosting automation and artificial intelligence at its other plants. In recent months, it has acquired Spanish automation company WIP Industrial Automation and Portuguese systems integrator StoneShield Engineering to augment those efforts.

Lear, the largest U.S. supplier, is pursuing a more conservative approach to capital deployment at its factories when it receives new business, Scott said.

“We’re much more tempered in how we look at deploying capital, particularly in new areas of investment with our customers,” he said.

BorgWarner has taken a similar approach. It looks to save $100 million through job cuts and reduced spending in its e-products division partly because of the weaker-than-expected sales of EV parts.

Those moves will help the company maintain its profit margins even as it expects its sales to decline in 2025, BorgWarner CFO Craig Aaron said.

“We’re going to keep our focus on cost control as we move forward,” he said on a Feb. 6 call.

Magna, the largest North American supplier, is also targeting expansive cuts, particularly as it relates to engineering. The company eliminated about $124 million in engineering spending in 2024, a number expected to grow to around $500 million by 2026, CFO Pat McCann said.

“You can see that structurally, we have made a lot of changes to different activities inside our company,” CEO Swamy Kotagiri said.

Magna and other suppliers are preparing for the impact of U.S. tariffs and potential retaliatory measures by other countries. The higher costs associated with the tariffs could prove to be unsustainable for much of the supply base, even after accounting for cost-saving measures, Kotagiri said.

“The industry has already been under stress for the last four years, whether it was the pandemic or the chip and other supply chain disruptions and macroeconomic interest rates,” Kotagiri told Automotive News. “We’ve been clawing back some of the negative impacts that we’ve had, but this comes on top of that. And that’s why I say it’s untenable for the supply base to absorb this.”