Automotive Supply Chain Risk Digest #346

September 22 - 28, 2023 by Elm Analytics

Closing

Toyoda Gosei is dissolving its UK subsidiary, TGUK, to refocus on its Czech entity, TGCZ, following declining auto production in the UK. Manufacturing previously under TGUK shifted to TGCZ this past July, with liquidation completed by the end of 2024.

Superior Die Set Corp. is closing its Oak Creek, Wisconsin, plant, impacting 133 jobs due to dwindling order volumes. Superior Die Set specializes in die sets and related components, mainly for the automotive sector, and has been facing a declining tooling market. The owners will continue operating their ProPlastica component-manufacturing business in Poland.

Expanding

Mercedes-Benz has applied for tax incentives to expand production at its Alabama and South Carolina facilities under the IRA.

Human Capital

Dana has temporarily laid off 240 employees at its Fort Wayne, Indiana, plant due to the UAW strike affecting its customers.

Industry Directions

BCG: Harnessing the Tectonic Shifts in Global Manufacturing

NIKKEI Asia: Asian companies need to start counting suppliers' carbon emissions

Labor

As the UAW Strike enters its third week with continued negotiations:

“We see the situation as much more difficult, especially for them (automotive suppliers) than the last time we went through this in 2019 with the strike against GM... Their balance sheets aren't nearly as healthy, and that's coming after a few years of 13, 14, 15 million units of production per year, despite each year thinking it would be higher than that.”
- Vitesco Technologies North America CEO Sandy Stojkovsk

NPR: Here's one potential winner from the UAW strike: Non-union auto workers in the South

Mergers, Ventures, Acquisitions

LG Chem and China's Huayou Group are partnering to vertically integrate the cathode supply chain by constructing four facilities. These include LFP cathode and lithium conversion plants in Morocco, an HPAL plant and a precursor plant in Indonesia. The LFP cathode plant in Morocco will produce 50k metric tons annually by 2026 for the North American market, as Morocco is under the US Free Trade Agreement. They also plan to expand into LMFP cathode materials, venture into Morocco's lithium conversion plant business, and cooperate in Indonesia on HPAL to precursor production.

Musashi Auto Parts India, Delta Electronics, and Toyota Tsusho Corporation have formed a JV to manufacture and sell EV drive units for two-wheeled vehicles in India, aiming to produce 1M units by 2030. With Musashi holding a 51% share, Delta 34%, and Toyota Tsusho 15%, the JV will develop the EV drive unit, establish motor and drive unit assembly factories in Bangalore by September 2024, and distribute products through Toyota Tsusho's global network, also targeting ASEAN and African markets.

Investment firms linked to major Chinese automakers like GAC Group and Geely are working together to bolster the EV semiconductor supply chain. This alliance marks progress toward China's aim of enhancing self-sufficiency in automotive semiconductor supply, which is crucial for EV growth and global competitiveness amid tech and trade tensions.

Opening

Michigan is dedicating more funds toward a $3.5B EV battery plant following Ford's decision to halt construction until the factory's competitive operation is assured. The delay announcement came amidst Ford's ongoing contract discussions with the UAW, which seeks to represent battery factory workers. Subsequently, a Michigan economic development board approved an extra $65 million for site preparation activities at the project site. While the construction pause coincides with a UAW strike, the ultimate goal remains to initiate battery production by 2026, targeting an annual capacity sufficient for 400k vehicles.

Sweden's Northvolt will build a $5.2B EV battery plant near Montreal, Quebec, marking the most significant private investment in the province's history. The factory is projected to have an initial annual manufacturing capacity of 30 GWh, potentially creating up to 3k jobs.

Ascend Elements, SK ecoplant, and TES are partnering to build a $65M lithium-ion battery recycling facility near Hopkinsville, Kentucky. The facility is expected to produce 12k metric tons of black mass annually.

Lamborghini is exploring constructing a new vehicle plant in Nayarit, Mexico.

Rolling Plus Chemical Industries will invest $1.07B in a new tire factory in Egypt. The 4.3M sq ft facility will have an annual production capacity of 7M tires.

Lucid inaugurated its first overseas factory, AMP-2, in Saudi Arabia, marking the country's first car manufacturing plant. Assembly currently focuses on semi-knocked-down production of Lucid Air electric sedans using kits pre-manufactured in Arizona. The site will transition to complete-build-unit production before the decade's end, aiming at an annual capacity of 155k EVs.

Production Decrease

Suprajit has filed a disclosure warning (pdf) that the UAW strike may affect its Matamoros plant in Mexico. The facility produces cable and electromechanical cable assemblies, plastic injection and extrusion molding, and zinc die casting. Over 50% of the factory's production supplies GM, Ford, Stellantis, and their Tier 1 and 2 suppliers.

Production Increase

Mushroom biofiber firm MycoWorks has started commercial-scale production of a leather alternative at its new manufacturing facility in Union, South Carolina. The 136k sq ft facility will supply General Motors with materials for automotive interiors.

Supply Chain

Smaller parts makers are seeking federal assistance as the UAW strike extends into its third week, bringing increased financial pressure on them. MEMA, representing over 1k automotive companies, has voiced concerns about smaller suppliers already in a fragile economic state. Around 75% of these suppliers anticipate laying off employees if the strike lasts for a month.

On September 25, MEMA reached out to President Biden, requesting federal help to sustain these suppliers through loans and an emergency workforce training program to assist them in transitioning to EV production.

Many small to medium-sized suppliers have been facing financial difficulties, further aggravated by the ongoing strike, which is affecting the entire automotive supply chain. Some suppliers maintain their workforce by reassigning them to different tasks, but the escalating strike raises concerns about a potential crisis if it continues.

The ongoing UAW strike highlights smaller suppliers' vulnerability in the automotive industry, especially amidst a transition to EV production. The federal aid sought could provide a crucial buffer to sustain the industry, maintain jobs, and ensure a smoother transition to EV technologies, underlining the intertwined challenges of labor relations, financial stability, and industry evolution.