Automotive Supply Chain Risk Digest #336

July 14 - 20, 2023 by Elm Analytics

Bankruptcy

Plastics tooling supplier Proper Group International LLC has been placed into receivership after closing its headquarters and selling off parts of its business. The company faced financial difficulties and is now being dismantled under the control of a court-appointed receiver.

Change In Management

Tata's Jaguar Land Rover has appointed Adrian Mardell as its CEO. Mardell previously served as the interim CEO since November 2022 when Thierry Bollore resigned. He also held the position of Chief Financial Officer and was a member of the JLR board earlier.

GM has hired Norm de Greve, the Chief Marketing Officer of CVS, as its new CMO. De Greve is known for his expertise in purpose-driven marketing and has led successful initiatives at CVS.

Industry Directions

The 2023 J.D. Power APEAL study revealed a decline in owner satisfaction with new-vehicle design and performance for the second year. However, EVs showed minor victories, with owners more satisfied with fuel economy than combustion engine vehicle owners. Automakers struggle to understand customer preferences despite extensive data collection, as indicated by declining satisfaction with vehicle exteriors.

Chinese carmakers are gaining market share in Russia, taking advantage of Western players' departure due to sanctions after the Ukraine invasion. Chinese imports now account for 49% of Russia's auto market, a significant increase from just 7% in June 2021. Chinese firms are also using factories abandoned by European, Japanese, and US carmakers to produce their vehicles, with six factories now assembling Chinese models or planning to do so. This growing presence of Chinese carmakers benefits Russia, enabling the restart of production at idled factories and keeping workers employed. However, some technologies will be transferred or localized, but not the most advanced ones. Russian automakers are increasingly dependent on importing assembly kits from China, with profits beholden to the yuan exchange rate.

Labor

As contract talks begin between the UAW and Detroit 3, the UAW is adopting new strategies and rejecting the traditional approach to seek significant gains for its members. The union's demands include pay raises, pension restoration, ending the two-tier wage system and use of temporary workers, and unionizing new EV battery plants. UAW President Shawn Fain is willing to consider strikes at all three automakers if necessary. The automakers, on the other hand, are likely to resist many of the union's demands to remain competitive amid the shift to electric vehicles. Negotiations are expected to be challenging, and the possibility of a strike remains elevated.

Reuters: Analysis: Elon Musk and Tesla loom over Detroit's auto labor talks

Litigation

Emanuele Palma, a Fiat Chrysler auto engineer, has pleaded guilty to conspiring to violate the Clean Air Act by making misstatements to U.S. regulators about diesel engines' emission control systems. The guilty plea accompanies Fiat Chrysler's earlier conviction for defrauding the EPA and customers. Palma's sentencing is set for October 17. Stellantis, the parent company of Fiat Chrysler, declined to comment on the matter. The company had agreed to pay around $300 million in criminal penalties in 2022 for evading emissions requirements for certain vehicles.

Mergers, Ventures, Acquisitions

Stellantis will invest $11.2B by 2030 to secure semiconductors amid ongoing shortages. The automaker expects chip shortages to reappear due to EV demand and geopolitical risks. Stellantis is partnering with companies like Infineon, NXP Semiconductors, and Qualcomm and developing its own chips with AiMotive and SiliconAuto. It aims to reduce reliance on China and Taiwan for chips. The company has supply agreements for silicon carbide chips, computing chips, and high-performance chips for EVs.

BorgWarner and Onsemi have signed a silicon carbide (SIC) deal worth over $1B. BorgWarner plans to use Onsemi's EliteSiC technology in its power modules for EV traction inverters, boosting performance and efficiency.

BYD and its Indian partner Megha Engineering and Infrastructure (MEIL) plan to invest around $1B in a production facility for electric cars and batteries in Hyderabad, India. The partners aim to produce 100k EVs annually in the long term. Initially, BYD may ship EVs in parts for assembly in India until local production is scaled up.

Mazda's new CEO, Masahiro Moro, plans to consider making EVs in North America around 2028, possibly in Mexico. Mazda will introduce two types of EVs, one based on existing architecture and the other on a dedicated platform. Production in North America is expected in the 2028-30 timeframe. Mazda aims for EVs to make up 25-40% of global sales by 2030. The decision between Mexico and Alabama for production will depend on cost factors.

Opening

Tata plans to build an electric vehicle battery factory in the UK to supply Jaguar Land Rover. The $5.2B investment will create 4k jobs and produce 40 GWh initially. The factory will be located in Somerset and start production in 2026 for JLR's electric models. By 2030, it will meet almost half of the UK's battery production needs, boosting the country's green initiatives.

Magna will invest $790M to build three factories in Tennessee to supply components for Ford's upcoming electric pickup production. Two of the plants will be located at Ford's BlueOval City campus, where next-generation electric pickups and EV battery cells will be manufactured. Magna will produce EV battery enclosures, vehicle frames, and complete seats starting in 2025, with the plants expected to employ up to 1.3k people.

Vietnamese EV maker VinFast will begin constructing its North Carolina factory on July 28. The plant in Chatham County will have an initial production capacity of 150k vehicles per year and is set to start production in 2025.

Nissan's historic Yokohama plant in Japan will soon start pilot production of solid-state batteries for EVs. The plant currently produces electric motors and this program is a crucial step in developing future EV technology. Nissan plans to release a fast-charging, high-energy solid-state battery by 2028.

Nissan is not the only automaker transforming noteable factories. GM plans to open an EV parts warehouse at the former American Motors Corp site in Detroit to support its nearby Factory Zero assembly plant. The 793k sq ft warehouse will be operated by Logistics Insight Corp., an affiliate of Universal Logistics Holdings Inc. The facility will optimize the delivery, storage, and processing of parts and products for the production of electric vehicles, including the GMC Hummer EV, Chevrolet Silverado EV, and Cruise Origin. The site will open in Q2-2024.

Production Decrease

Volvo's flagship electric crossover, the EX90, faces a five-to-six-month delay in production due to software integration issues with its lidar system. The EX90 is the first Volvo model to incorporate lidar and will offer it as standard equipment.

Production Increase

Tesla has announced the production of its first Cybertruck at its Texas factory. It is unclear if this marks the beginning of the serial output or if it's another prototype. The electric truck's production has been delayed multiple times, with battery supply logistics being a significant factor. The Cybertruck will use 4680-format cells, and Tesla may initially get them from Panasonic and LG Energy Solution.