Automotive Supply Chain Risk Digest #332

June 16 - 22, 2023

Change In Management

Google executive Lin-Hua Wu has been appointed as GM's new senior vice president and chief communications officer, effective August 21.

Closing

Ohio-based auto supplier Shiloh Industries is closing its tool and die shop in Warren, Michigan, following millions in losses after a bankruptcy. The closure will affect 107 employees and will be complete by February 2024.

Disaster

A worker tragically lost their life following an incident at the construction site of the new Ford central campus building in Dearborn, Michigan.

Expanding

GM is investing $920M million to expand its DMAX engine plant in Brookville, Ohio, for future production of ICE heavy-duty powertrains. The expansion includes constructing a 1.1M sq ft addition to the existing 250k sq ft facility.

Human Capital

Ford Motor is reportedly preparing for another round of layoffs as part of its efforts to streamline operations and reduce costs. The layoffs, expected to affect US salaried workers primarily, could be announced as early as next week. The exact number of layoffs is unknown, but they are expected to impact employees in both Ford's ICE and EV divisions. Ford's CEO, Jim Farley, has emphasized the need to align costs with competitors as it invests in transitioning its lineup to electric vehicles. Ford aims to cut at least $3B in annual expenses by mid-decade. The automaker has previously conducted layoffs in both the US and Europe to move toward this goal. This isn't unique to Ford, though. Rising interest rates and inflationary pressures have prompted several automakers, including General Motors and Stellantis, to implement cost-cutting measures.

Industry Directions

Lithium iron phosphate (LFP) is gaining popularity as the material of choice for EV batteries due to its reduced cost and improved performance. Tesla has embraced LFP, and other automakers, such as Toyota and Hyundai, also plan to use LFP batteries in their future vehicles. The increasing interest in LFP has led to significant investments in LFP production facilities, particularly in the US, where more than $14B will be spent on new manufacturing plants. LFP is a key component in producing more affordable EVs and achieving cost-effectiveness in grid storage systems.

New vehicles face more problems due to new technologies, according to JD Power's 2023 Initial Quality Study. Issues include ADAS features and wireless charging pads. Stellantis brands ranked highest, while Tesla and Volvo ranked lowest.

Rivian is planning an interesting experiment to sell its excess stock: selling directly to consumers in the parking lot of its plant in Illinois.

Mergers, Ventures, Acquisitions

BlueOval SK, the joint venture between Ford and SK On, will receive a $9.2B loan from the US Department of Energy. The loan will support the construction of battery plants in Tennessee and Kentucky. This loan is the largest ever granted by the DOE and is part of the Inflation Reduction Act.

Abu Dhabi's government is buying a 7% stake in Nio, providing much-needed capital. Nio has struggled with losses and uncertain demand in China's competitive EV market. The investment will help Nio strengthen its balance sheet and support its growth. Nio plans to expand internationally and double its sales to 250k vehicles in 2023.

Stellantis and Foxconn have formed a 50/50 joint venture called SiliconAuto to design and sell semiconductors for the automotive industry starting in 2026. The joint venture will supply Stellantis, Foxconn, and other customers with semiconductors, particularly for electric vehicles and computer-controlled features. The deal aims to ensure a stable supply of essential components for Stellantis' software-defined transformation. SiliconAuto will be based in the Netherlands and have a management team of executives from both companies. This collaboration is separate from their joint venture, Mobile Drive, which focuses on in-car and connected-car technologies.

Mazda and Panasonic Energy are in talks for a battery supply partnership for Mazda's electric vehicles. Panasonic would provide cylindrical lithium-ion batteries for Mazda EVs, expected to launch in the latter half of the decade. The companies aim to secure a medium to long-term partnership as part of Mazda's electrification plans.

Polestar and Xingji Meizu are teaming up to turn Flyme Auto into an in-car app and software system. They're investing $200M in a joint venture to improve Geely's car tech, but it will focus on the Chinese market and won't affect Polestar's work with Google. Western brands have yet to replicate the entertainment choices embraced by Chinese drivers, such as in-car karaoke.

Rivian is buying EV route planning app maker Iternio, including its A Better Routeplanner app and data. Rivian will use the technology to improve its electric vehicles and charging network.

Opening

Tesla CEO Elon Musk plans to invest heavily in India and bring Tesla to the country. Discussions have been underway to set up a factory to manufacture electric vehicles and EV batteries in India, with the goal of utilizing the country as a base for production and innovation.

Production Increase

Rivian is rapidly increasing production of its electric SUV, expecting to build 50k vehicles this year, with the SUV accounting for the majority of its production volume. The company's progress in ramping up production, addressing semiconductor shortages, and developing its in-house two-motor powertrain has contributed to the increased output.

Regulation

Mercedes-Benz's introduction of Level 3 AV tech, Drive Pilot, is expected to face legal complexities and safety concerns. While Level 3 automation allows drivers to shift their attention from traffic, they are still responsible for taking control of the vehicle when prompted. This ambiguity surrounds the permissible activities while the system is engaged, and the question of liability in the event of a crash presents challenges. The introduction of Level 3 AV tech highlights the need for clear regulations and definitions of responsibility for vehicle operations.

The US Senate overwhelmingly voted in favor of a tax treaty with Chile to secure access to lithium, a critical mineral for electric vehicle batteries. The treaty, already approved by Chile's Congress in 2015, received a strong bipartisan majority in the Senate.

Stellantis is limiting sales of ICE vehicles in 14 states to meet stricter emissions standards. The company is reducing allocations to dealers and making adjustments between states to comply as these states have more stringent regulations than federal standards. The restrictions result from a legal dispute between the California Air Resources Board and the Trump administration.

Supply Chain

A shortage of specialized railcars used to transport vehicles is causing disruptions in the auto industry. Approximately 70k newly manufactured vehicles are delayed, slowing down shipments from assembly plants and impacting transportation from Mexico. The Alliance for Automotive Innovation has called on the US Surface Transportation Board to intervene. Automakers have reduced new-car production, affecting sales and crucial vehicle launches. The root causes are underinvestment in equipment and labor by railroad companies and changes in supply chain patterns.