Automotive Supply Chain Risk Digest #342
August 25 - 31, 2023 by Elm Analytics
Closing
Japanese-owned TRIN announced the closure of its plant in Ashley, Indiana. The company manufactures components such as shift levers, push smart and multi-function switches, key sets, and seatbelts for Toyota, Nissan, Subaru, Ford, and General Motors. The closure is set to take place on March 31, 2024, and will result in the permanent layoff of 155 employees set to begin in November.
Disaster
Volkswagen faces production shutdowns due to heavy floods that disrupted engine parts supplies from a Slovenian supplier, KLS Ljubno. The T-Roc small crossover, a top seller in Europe for VW, will see its production paused at the Autoeuropa plant in Portugal for nine weeks.
The flooding has severely impacted KLS Ljubno, which supplies engine parts for the T-Roc, leading to delivery issues. The flooding caused substantial damage to the supplier's facilities and equipment, and it's estimated to take until October to restart some production.
The floods in Slovenia have been described as the country's worst-ever natural disaster. The impact on VW's output will likely extend to its other factories, particularly those building ICE vehicles.
Kia's factory in Hwaseong, South Korea, has been temporarily halted due to a fire on the second floor of the plant's robot-operated painting line. The fire will delay the production of thousands of vehicles, including the K5, K8, and EV6. The plant is set to be suspended through September 6, with normal operations expected to resume afterward.
Earning Dip
Swedish EV maker Polestar's loss narrows as supply chain snags ease.
Ford expanded its line of credit by $4B to weather market 'uncertainties.'
Industry Directions
Podcast: Land of the Giants: The Tesla Shock Wave
(Examines the past, present, and future of the company that jumpstarted the shift to electric vehicles.)
Labor
A coalition of labor unions and civic groups in Georgia and Alabama is launching a campaign targeting Hyundai's electric vehicle plants and clean energy suppliers. The campaign aims to pressure Hyundai, a nonunion carmaker, to protect and train workers in exchange for federal funding under President Biden's signature initiatives.
The focus on Hyundai's shift to EVs is intended to create inroads at other automakers as well. This effort could also pressure domestic automakers amid ongoing contract negotiations with the United Automobile Workers (UAW) union.
The campaign has political ramifications for Biden, setting specific demands on a significant automaker in a key swing state for the 2024 presidential election. The coalition seeks fair labor standards for jobs supported by taxpayer dollars and urges automakers shifting to EVs to honor the right to organize, avoid plant closings, and provide worker training programs.
Hyundai Motor's union workers are set to resume negotiations with company management after discussions came to a halt earlier this month. The union, consisting of 44k members, unanimously agreed to restart the talks following the company's request. However, during the ongoing discussions, members will not work extra shifts. One of the main sticking points is the union's demand to increase the retirement age to address inadequate pensions in a rapidly aging South Korean society.
The 18k+ members of Canada's Unifor have voted overwhelmingly to authorize strike mandates at the Detroit 3. Current contracts expire on September 18.
Unifor has selected Ford as its target for the contract negotiations with the Detroit 3 automakers. The strategy sets a pattern for bargaining talks with the other two automakers, General Motors and Stellantis. The negotiations with Ford will continue in the coming weeks, with talks paused with GM and Stellantis.
Also:
Ford Offers Contract with Wage Increase to UAW
West Coast Port Workers Approve Six-Year Contract
Mergers, Ventures, Acquisitions
Hyundai and LG will increase their investment in their Georgia battery plant, adding an additional $2B.
China's BYD has acquired US-based Jabil's Chinese mobility business unit for $2.2B, enhancing its electronic components sector reach.
SAIC will form a JV with startup QingTao to make solid-state batteries.
Germany's industrial group AEQUITA acquired brake friction solutions company TMD from its Japanese parent company, Nisshinbo Holdings.
India’s JSW is reportedly interested in using Leapmotor's EV platform to manufacture vehicles in India under its own name.
Opening
Daesol Ausys Georgia, a Korean-based interior components manufacturer, will establish a new $72M manufacturing facility in West Point, Georgia, set to open in December 2024. The company supplies Kia, Hyundai, and General Motors and will focus on producing luggage boards and luggage covers.
Regulation
The US Energy Department announced $2B in grants and $10B in loans to support auto companies shifting away from ICE vehicle manufacturing. This IRA-based allocation aims to address concerns raised by the UAW over potential job losses related to a smaller workforce need to manufacture EVs.
This funding is seen as a move to reassure both automakers and the labor union, aligning with President Biden's push for clean energy and his administration's aim to create a win-win situation for auto companies and unionized workers.
The US is broadening its efforts to eliminate connections to forced labor in Chinese supply chains, with EV batteries and car parts now under scrutiny.
A year-old Uyghur Forced Labor Prevention Act (UFLPA) bans the import of goods made in Xinjiang, China. Enforcement initially focused on products like solar panels, tomatoes, and cotton apparel. However, the focus is now on lithium-ion batteries, tires, aluminum, and steel components.
Increased inspections by US Customs and Border Protection will pose challenges for automakers that must ensure their supply chains are free from links to regions of reported forced labor.
This scrutiny will impact automakers' efforts to establish clean and ethical supply chains, particularly for critical industries like solar energy and electric vehicles.
"If you're a car manufacturer and you have not started mapping your supply chains for the critical minerals and the parts of the sub-assemblies that are going through China and where they are getting their goods from, you are running a real peril as we go into the back half of the year,"
- Brandon Daniels, Exiger CEO
Mexico has announced increased import duties for goods from non-Free Trade Agreement countries. The increase will last two years, from August 16, 2023, to July 31, 2025.
The tariff increase ranges from 5% to 25% and applies to 392 tariff lines, covering various goods, including steel, aluminum, auto parts, chemicals, and more. Over half of these tariff lines are related to steel and steel products. The tariff increase aims to support vulnerable sectors of the Mexican economy, promote domestic industry recovery, and bolster the local market.
It's crucial for companies to review the impacted tariff lines, assess the origin of their inputs, and consider potential effects on their supply chains and contractual obligations.
Shutdown
Toyota's production shutdown in Japan was caused by a computer system glitch that occurred during a system update.
The shutdown affected 14 assembly plants and disrupted Toyota's lean manufacturing system, which focuses on reducing inventory and maximizing production efficiency. The automaker has not provided specific details about the glitch but ruled out a cyber attack as the cause.
The outage could be more costly than a similar shutdown in 2022, as Toyota's production has been recovering this year. Based on output data and financial reporting, the disruption could lead to a loss of around $356M in revenue.
General Motors extended the production halt at its Fort Wayne Assembly plant in Indiana for another week due to an ongoing parts shortage. The plant manufactures full-size Chevrolet and GMC pickups.
Production at the plant was initially set to resume on September 5 after a pause that began on August 28. However, the plant will now be offline until September 11.
This extended shutdown results from the ongoing challenges automakers have faced due to supply chain issues, including a lack of parts, railcars, and truck drivers, not to mention ongoing contract negotiations between the Detroit 3 and the UAW.