The American auto industry is working out how to adjust supply chains if the trade war continues, a potentially expensive prospect.

Volkswagen is working on back-up plans for how its passenger car brand could tackle U.S. tariffs on imports from Mexico, while BMW is preparing to absorb the cost, as the auto industry reels from U.S.

In a recent report by Reuters, the CEO of Volkswagen Passenger Cars (VLKAF,) Thomas Schäfer, noted that increasing production at its Chattanooga, Tennessee plant to comply with President Trump's tariff rules is not a realistic endeavor for the company.

Volkswagen says it will scale back production at its Chattanooga plant from 3 shifts to 2, starting at the end of this month.Affected employees will be offered

The United Auto Workers union said on Thursday it filed unfair labor practice charges against Volkswagen , as the automaker cut jobs at a factory in Tennessee where the union is negotiating its first contract after winning an election there last year.

VW is cutting back to two shifts producing the electric VW ID Buzz, which is being built at the first foreign-owned Southern auto plant to unionize.