Automotive Supply Chain Risk Digest #350

October 20 - 26, 2023 by Elm Analytics

Closing

Japan's Akebono will close its brake factory in Elizabethtown, Kentucky, by the end of 2025. This decision was disclosed in a document submitted to Japan's stock market regulator. The factory, operational since 1987, currently employs 629 workers. The closure is part of Akebono's move towards a "one factory system" in the US, having already shut down other plants in 2020.

Expanding

Tesla is looking to expand its Gigafactory in Grünheide, Germany, in the first half of 2024. Plans include building a second production hall, a battery recycling plant, and doubling the factory's production capacity to 1M EVs / year. Tesla also aims to increase battery storage production capacity from 50 to 100 GWh. The expansion project has faced over 1k public objections, mainly centered on environmental concerns such as water consumption.

Denso intends to invest $3.3B in semiconductors by 2030, aiming to triple its chip business amid the rise of electric and connected vehicles.

Labor

Ford is facing a challenging recovery, anticipating weeks to resume full production across plants in Michigan, Illinois, and Kentucky following the resolution of a 41-day strike ($) with the UAW.

The strike, which cost Ford $1.3B, obliterated their third-quarter net income of $1.2B. As the agreement was reached, employees quickly left the picket lines, but many now find themselves temporarily laid off, anticipating further instructions.

The new deal, pending approval from UAW leadership and its 57k members, proposes significant wage hikes over the next four and a half years, exceeding the cumulative raises from the past 22 years. This includes a substantial 25% wage increment, with 11% available upon approval.

Moreover, the deal fast-tracks new hires to top wages within three years, a reduction from the previous eight years. It also bolsters pension and 401k plans and, notably, allows strikes over plant shutdowns. Analysts, however, warn that such agreements might escalate labor costs, prompting automakers to eye investments in countries with lower costs.

The UAW presented a new contract offer ($) to General Motors as the union's strike reached its 42nd day. Active negotiations were also underway with Stellantis.

UAW President Shawn Fain intensified the situation earlier in the week by ordering walkouts for about 5k GM workers in Arlington, Texas, and 6.8k Stellantis employees in Sterling Heights, Michigan. Previously, both GM and Stellantis had offered a wage increase of 23%, with differences in the timeframes to reach the top wage rate.

Samsung SDI, a significant partner in GM's and Stellantis' EV battery manufacturing ventures, states it has not engaged in talks with the automakers concerning their labor negotiations with the UAW.

This clarification comes after the UAW revealed that GM promised to include battery manufacturing plant workers in its master agreement.

Metalworkers at GM's Brazilian plants began a strike on Monday, protesting recent layoffs at its three Sao Paulo factories tied to decreased sales and exports. GM labeled this reduction as essential for the company's sustainability.

The Sindmetal union, representing the workers, stated that production would only restart once the layoffs are revoked, and job security is ensured for all employees, referring to a prior agreement for job stability until May 2024.

NYTimes: Nonunion Workers Are Playing a Big Role in the Autoworkers' Strike (gift)

Litigation

The DoJ has broadened its investigation into Tesla's business practices. The expanded inquiry now includes concerns regarding the accurate range of fully charged Tesla vehicles and "personal benefits" provided to high-ranking executives. Furthermore, the US attorney's office in New York is also probing the use of funds for a house planned for Elon Musk near the Tesla factory in Austin, Texas.

Mergers, Ventures, Acquisitions

General Motors and Honda have abandoned their previously announced project to co-develop a range of affordable EVs announced in April 2022. They had intended to introduce several cost-effective EVs on GM's flexible platform with its Ultium-branded batteries, aiming to produce "millions" of these vehicles by 2027.

Honda's CEO, Toshihiro Mibe, stated that after a year-long assessment, they recognized the difficulties from a business perspective. Although this specific collaboration has ended, the partnership between GM and Honda in other areas remains, such as the Honda Prologue and their combined efforts on Cruise's autonomous shuttle.

The termination of this JV could raise concerns about the viability and future trajectory of the affordable EV market, especially as automakers grapple with price cuts, narrowing profit margins, and fluctuating demand.

Stellantis has announced its acquisition of a $1.6B (21% stake) in the EV manufacturer Leapmotor. This strategic investment is intended to reinvigorate Stellantis's position in China, the world's largest car sales market. In return, Leapmotor gains an entrance into the European market. The deal also provides Stellantis access to Leapmotor's advanced EV technology at a time when many legacy car manufacturers are transitioning to electric vehicles.

Samsung SDI announced it will provide Hyundai Motor with EV batteries for a period of seven years, starting in 2026.

Opening

Factorial Energy has inaugurated a new solid-state battery manufacturing plant in Methuen, Massachusetts. Initial operations involve the cathode coating line, with plans to introduce more equipment, targeting an annual production capacity of 200 MWh.

Aunde, an Italian automotive textiles supplier, opened a new 140k sq ft production facility in Leskovac, Serbia, to produce seat covers for nearby Fiat.

Posco International Mexico E-Mobility has opened a new plant in Ramos Arizpe, Coahuila, Mexico, to produce motor cores for EVs.

Kostal Automobil Elektrik opened a new 215k sq ft power electronic parts plant in Queretaro, Mexico.

In the second half of 2024, Optimas will open a 32k sq ft cold-forming fasteners plant in Nuevo León, Mexico.

Raw Material Disruption

China has taken steps to curb its graphite exports, a vital component for EV batteries, beginning on December 1. Being the world's predominant producer, China refines over 90% of the global graphite used in almost all EV battery anodes.

China's announcement came after the US blocked access to specific computer chips and Europe considered imposing tariffs on Chinese steel and aluminum. Although the decision is not an outright ban, the time expense of the permit process may stimulate nations to prioritize alternative materials and sources.

While the US and Europe aim to challenge China's dominance by focusing on synthetic graphite, experts predict a challenging path ahead. Industry predictions suggest synthetic graphite might make up nearly two-thirds of the EV battery anode market by 2025. Meanwhile, companies are also exploring silicon as an alternative anode material for batteries.

Regulation

European automakers are urging European Commission President Ursula von der Leyen to delay the "rules of origin" tariffs starting January 1.

Originating from post-Brexit deals, these could add a 10% tariff on EVs without European-sourced batteries. The UK and EU car sectors request an extension to 2026, noting the battery market's dominance by Asian countries.

The potential introduction of these tariffs highlights the ongoing complications from Brexit and the intricate balance between political decisions, economic impacts, and environmental goals.

Shutdown

As of October 26, Toyota's domestic production should be fully restored after an explosion on October 16 at Chuo Spring. The accident at the supplier led to over a week of disruptions in Toyota's operations.