Automotive Supply Chain Risk Digest #348

October 6 - 12, 2023 by Elm Analytics

Bankruptcy

Chinese EV startup WM Motor has begun restructuring this week. The company acknowledged its "short-term operating difficulties" and cited factors such as unstable capital markets, fluctuating raw material prices, and difficulties securing funding.

Sales data shows a significant drop ($), with only 1.3k cars sold in the first eight months of this year, down from approximately 35k electric SUVs sold in each of the previous two years.

WM Motor's struggles underscore the volatile nature of the EV industry in China, highlighting the challenges emerging automakers face amidst aggressive competition, evolving market dynamics, and changing financial landscapes.

Change In Management

EV maker Xpeng suspended its vice president and head of procurement, Li Feng, during its probe related to corruption ($). Xpeng's statement added that the company has been "strengthening supply chain management this year and some supply chain staff have been investigated."

Industry Directions

S&P AutoTechInsight: While the industry talks about casting, the play is being rescripted and the staging changed

Labor

The UAW, on Wednesday, extended its ongoing strike to include Ford's Kentucky Truck Plant, bringing the company's most profitable assembly lines to a halt. The Kentucky Truck Plant employs around 8.7k workers and manufactures Super Duty pickups, Ford Expedition, and Lincoln Navigator large SUVs. The union attributed the decision to Ford's reluctance to further negotiations.

UAW President Shawn Fain expressed his frustrations, stressing the need for a fair contract with Ford and the entirety of the Big Three. In response, Ford labeled the union's move as "grossly irresponsible" and cited their "outstanding offer" and good faith negotiations.

Ford Motor communicated that it would not enhance its offer (gift), claiming further improvement would compromise its business and potential investments in EVs.

A prolonged strike would likely impact 13 of its plants and 600 of its suppliers, said Ford's president, Kumar Galhotra.

Notably, the Kentucky Truck plant generates about 16 percent of Ford's revenue, producing a new vehicle every 37 seconds.

Last Friday, UAW signaled significant progress in its contract talks, consequently deciding not to extend its strike action at that point.

The UAW has achieved significant concessions, including a commitment from GM to place its EV battery production under the national contract. On the other hand, Ford has proposed a substantial wage hike and a shorter duration for new hires to achieve top pay. In addition, Stellantis and Ford have also shown flexibility by agreeing to reinstate a previous cost-of-living adjustment formula.

Despite the advancements, challenges persist, such as Ford's hesitation to include its battery plants in the national agreement and the demand for improved retirement benefits.

Automotive News estimates 34k UAW-represented workers are on strike against the Detroit 3. Approximately 7.8k additional people, including those employed by suppliers, have been laid off.

In Canada, GM and Unifor reached a tentative contract agreement that paused a 12h strike involving more than 4k autoworkers. The strike was initiated due to GM's alleged refusal to match the three-year contract that Unifor had with Ford Motor, which included significant wage increases.

Unifor's national president, Lana Payne, confirmed that GM addressed all major concerns, including pensions, retiree income, and turning temporary workers into permanent employees. The agreement affects GM's assembly plant in Oshawa, a powertrain plant in St. Catharines, and a parts distribution center in Woodstock.

Meanwhile, a separate strike against ZF Group by UAW-represented workers enters its fourth week. The Tuscaloosa, Alabama, axle plant supplies Mercedes-Benz. A ZF Group spokesperson mentioned a "renewed interest" from the UAW in negotiations, expressing hope for an agreement soon. ZF's Tuscaloosa plant has remained operational ($) throughout the strike, leaving Mercedes vehicle production unaffected.

Mergers, Ventures, Acquisitions

Germany's Schaeffler is making moves to acquire drive manufacturer Vitesco. Last year, Schaeffler increased its stake in Vitesco to 49.99% and now aims for a complete merger. Schaeffler plans to combine the two companies' E-Mobility Divisions, leveraging shared electrification technologies.

Toyota Motor North America signed a long-term contract with LG Chem worth $2.1B to procure cathode materials for its North Carolina battery plant. The supply of these materials will commence in 2025 from LG Chem's new facility in Tennessee. This agreement, which will last until 2030, stands separate from a recent deal Toyota made with LG Energy Solution concerning complete battery modules.

Toyota and Idemitsu Kosan have partnered to develop and produce solid-state batteries by 2027-28. Toyota, aiming to catch up with competitors like Tesla and BYD in the EV market, claims to have found a technological breakthrough to address solid-state battery durability issues. Idemitsu Kosan is developing the solid sulfide electrolyte used in these batteries. As per Toyota's statement, solid-state batteries, considered superior to their liquid electrolyte counterparts, could offer an EV range of up to 750 m with a rapid 10 min charging time.

Denso and Mitsubishi Electric will collectively invest $1B in Pittsburg-based automotive chip maker Coherent. The investment aligns with Coherent's plans to amplify silicon carbide wafer production, which is crucial for extending the range and speed of charging EVs.

EV maker VinFast will be "gifted" a 99.8% stake in its sister battery company VinES, both under their parent conglomerate Vingroup. The Vietnamese company aims to save 5% to 7% on battery expenses.

Opening

Stellantis and Samsung SDI will build a second EV battery plant next to their first in Kokomo, Indiana. The plant, set to open in 2027, is expected to employ 1.4k workers with a production capacity of 67 GWh.

Volkswagen's PowerCo and the Belgian materials company Umicore have selected Nysa, Poland, as the location for their first EV battery parts factory. This decision is part of their $2.9B JV, named Ionway, announced in December 2021. Ionway aims to achieve an annual production capacity of 160 GWh by the decade's end, equating to batteries for approximately 2.2M EVs.

China's BYD has begun constructing its EV factory in Bahia, Brazil, a former Ford site. The company expects to produce the first vehicles at the facility in late 2024 or early 2025.

Raw Material Disruption

While other industries have had a decline in raw material and parts shortages, over 53% of Germany's automotive sector is still grappling with these bottlenecks.

Regulation

Ultium Cells in Warren, Ohio, is facing over $270k in fines following an investigation by OSHA that began after an explosion and fire last March. OSHA cited the company for 19 job safety and health violations.

Inspectors noted that Ultium, a JV between GM and LG Energy Solution, did not adhere to safety protocols, failed to train workers adequately, and did not use necessary personal protective equipment.

OSHA previously cited the Warren plant 11x since it opened in August 2022.

Shutdown

Audi has resumed production at its Brussels factory after employees stopped work due to a disagreement over reduced production targets for the Q4 E-tron EV.

A significant number of the 3k workers at the plant stopped working after Audi revealed plans to produce fewer Q4 E-trons in Brussels than initially anticipated. This resulted in halted assembly lines ($).

Audi uses the Brussels facility as a supplementary factory to Volkswagen Group's EV plant in Zwickau, Germany. Despite recent layoffs at the Zwickau plant attributed to lower EV demand, Audi stated that it remains committed to Q4 E-tron production in Brussels and Zwickau.

Supply Chain

A surge of migrants to the US/Mexico border is causing disruptions ($) in the auto industry.

Ferromex, Mexico's largest railway operator, has suspended services as many migrants are trying to board railway cars carrying assembled vehicles.

Additionally, increased security measures by Texas, including additional cargo truck inspections, have left 19k trucks loaded with $1.9B in goods idling in Mexico.

This situation affects Nissan, GM, and Stellantis, causing delivery and supply chain interruptions in addition to countless suppliers.

Some manufacturers are turning to alternate transportation methods, such as airlifting components and shipping via sea.

Border delays will exacerbate suppliers' time to restart production after the UAW strike ends.