Automotive Supply Chain Risk Digest #330

June 2 - 8, 2023 by Elm Analytics

Change In Management

Ford has hired Liz Door, a sourcing executive at Whirlpool, as its chief supply chain officer to address quality issues and cost concerns. Door's appointment is part of a minor executive team shakeup, with two executives retiring and other changes taking place. The move comes as Ford aims to reset supplier relations.

Meanwhile, in the regulatory sector, Stephen Ridella, the head of the National Highway Traffic Safety Administration's Office of Defects Investigation, departed the agency to work for Amazon's self-driving unit Zoox. Anne Collins, another NHTSA official, chose to retire in April, which has led to concerns about vacant leadership positions at the agency while safety investigations continue and traffic fatalities are on the rise.

Expanding

Lots of ICE truck and SUV plant announcements from GM:

• The company will invest over $1B in upgrading its plants in Flint, Michigan, to prepare for the next generation of ICE heavy-duty pickups. The announcement comes before contract negotiations with the UAW.

• GM will invest $209 million to retool its Oshawa Assembly Plant in Canada to produce the next generation of ICE full-size trucks. The investment builds on GM's commitment to Canadian manufacturing and follows a previous investment of over $903 million in the Oshawa plant in 2020.

• It plans to invest $500M in its Arlington Assembly plant in Texas to produce future full-size ICE SUV models like Chevrolet Tahoe, Suburban, GMC Yukon, and Cadillac Escalade.

Overall, GM confirmed plans to build EVs within its current factories while converting some plants to produce only EVs and others to manufacture electric and gasoline vehicles. The company does not anticipate any plant closures as it transitions away from internal combustion engines.

Toyota will invest an additional $328 million in its Guanajuato plant in Mexico to adapt production for a new hybrid model of its Tacoma pickup truck, aligning with its electrification strategy.

Volvo is committed to going fully electric globally by 2030, with no exceptions or reliance on combustion sales in any market, according to the brand's chief commercial officer, Björn Annwall. While this all-in strategy may cost Volvo sales in markets like the US, which has lower EV adoption rates, the company believes focusing on battery-powered vehicles gives it the best opportunity to produce compelling EV products. Volvo plans to introduce five new and redesigned EVs in the coming years and will continue to offer mild and plug-in hybrid models to cater to customers not yet ready for full electric power.

Human Capital

Autoliv announced plans to accelerate cost-cutting measures, primarily in Europe, which will eliminate 6k direct jobs and 2k indirect jobs - 11% of its workforce. The company aims to optimize its geographic footprint and simplify operations, with several European sites to close. Autoliv faces challenges negotiating prices with European customers due to high inflation and a challenging macroeconomic environment. However, there are no plans to close any US plants at this time. The company expects the new initiatives to be fully implemented by 2025.

Industry Directions

Two EV battery innovations announced from China:

• Gotion High-Tech developed a new lithium-iron-manganese-phosphate battery that can power an electric vehicle for 1,000 kilometers on a single charge. The battery is lighter, smaller, and cheaper than conventional batteries and has passed safety tests. Gotion plans to start mass production of the battery next year.

• Greater Bay Technology has conceived the Phoenix cell, an EV battery that addresses power loss and reduced range in cold weather. The battery uses superconducting materials and thermal management technology to quickly heat the battery, enabling normal operation and fast charging in all weather conditions.

Labor

In other battery news, Clarios is shifting production from its striking Toledo plant to a St. Joseph, Missouri facility. The move comes as over 400 UAW members continue their strike, which started on May 8. The exact amount of production being shifted is unknown, but the Holland plant produced 125k to 150k batteries per week before the strike. The UAW and Clarios have been unable to reach a fair agreement, and UAW representatives express skepticism about the company's intentions.

US West Coast dock workers have staged work actions, resulting in the shutdown of some terminal operations, as labor talks between the employers and the union continue for over a year with disagreements over wages and benefits. The disruptions raise concerns over potential cargo delays and losses to rival ports.

The UAW is gearing up for negotiations with General Motors, Ford, and Stellantis over the future of workers at their electric-vehicle battery plants, as the 18k new hires will work for joint ventures not covered by existing labor contracts. The outcome of the negotiations, set to begin in July, will have far-reaching consequences for auto workers transitioning to electrification and unions representing the new generation of workers in the EV industry. The UAW aims for a just transition and for EV battery workers to receive fair pay and benefits.

Mergers, Ventures, Acquisitions

GM announced a partnership with Tesla to utilize Tesla's North American charging network and technologies. Additionally, GM will integrate Tesla's charging port standard, the North American Charging Standard (NACS), into its EVs in 2025. The partnership will save GM $400 million in EV charging infrastructure costs. This collaboration follows a similar deal between Tesla and Ford, putting pressure on other automakers to adopt Tesla's charging technology.

Green Steel ventures:

• ArcelorMittal Dofasco in Ontario will supply GM with recycled and renewably produced steel. The move aligns with the automotive industry's emissions reduction targets.

• Mercedes-Benz has signed an agreement with H2 Green Steel to provide low-carbon dioxide steel for its assembly plants in Europe and North America. The partnership aims to establish a sustainable supply chain for "almost CO2-free" steel, produced using hydrogen and renewable energy. Mercedes plans to use green steel in vehicle production by 2025 as part of its efforts to decarbonize its supply chain.

Opening

Tesla is reportedly in talks with the Valencia government in Spain to build a $4.8B gigafactory. Using EU recovery funds, Spain wants to attract automakers to invest in electric vehicle production.

Toyota announced plans to invest $50M in building a new battery lab in Michigan to evaluate batteries for EVs and hybrids,

Regulation

Stellantis and General Motors have paid a combined $363M in penalties for failing to meet US fuel economy standards. Stellantis paid $235M for the 2018 and 2019 model years, while GM paid $128M for 2016 and 2017. The penalties reflect past performance and the companies' efforts to comply with stricter regulations, and this is the first time in three years that fuel economy penalties have been collected. NHTSA plans to propose more stringent fuel economy standards for the future.

China has launched a nationwide campaign to boost automobile purchases and stimulate demand in the country's largest auto market. The campaign includes targeted policies and measures to support car consumption, focusing on new energy vehicles. Financial institutions will be encouraged to provide lending support. The government plans to extend tax incentives for new energy vehicle purchases. Price cuts and the introduction of new products have driven the recent sales growth.

Relocating

Airspace Experience Technologies, the startup behind the Sigma-6 eVTOL aircraft, is struggling financially and may relocate from Michigan. Founder Jon Rimanelli is disappointed with the state's lack of support and investment. The flying car industry has yet to progress as quickly as anticipated, with a shift towards electrification and practical driverless advancements instead of full autonomy.

Risk Analytics

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