Automotive Supply Chain Risk Digest #353

November 10 - 16, 2023, by Elm Analytics

Bankruptcy

Stellantis, Aident, and Yanfeng received court approval to retrieve tooling from Unique Fabricating, which recently filed for Chapter 7 bankruptcy.

Unique Fabricating, an Auburn Hills, Michigan-based supplier of plastic, rubber, and foam components, is expected to close its facilities across North America, resulting in widespread layoffs.

Automakers typically own supplier equipment to safeguard against situations like bankruptcy. The bankruptcy follows a May bailout agreement involving GM, Stellantis, and Yanfeng, which provided $15M to assist Unique Fabricating.

Cyber Security

Stellantis reported disruptions in its North American assembly plant production due to a cyberattack ($) on Yanfeng Automotive Interiors, a key supplier based in Novi, Michigan. Yanfeng manufactures seats, interiors, and electronics, among other automotive parts.

The specific Stellantis plants affected by the disruption have not been disclosed. General Motors, another client of Yanfeng, is also monitoring the situation closely to minimize any impact on its operations.

Earning Dip

Robert Bosch is facing significant financial impacts ($) due to challenges in manufacturing its latest 48v mild hybrid system for the Mercedes E-Class and GLC models.

The inability to scale up production swiftly has led to reduced output of these high-margin Mercedes models, with an estimated 5% drop in projected sales, or roughly 100k cars, in Q3-2023.

Bosch Mobility CEO Markus Heyn acknowledged the manufacturing complexities and higher-than-anticipated costs of the innovative battery system, which includes extensive electronics integration.

Despite a $75M investment in its Eisenach factory and efforts to fix production issues, the complexity and rapid ramp-up during the COVID-19 pandemic presented substantial industrialization challenges.

Expanding

Volkswagen is investing $750M to expand EV production in Mexico. Over the next few years, VW will upgrade the Puebla plant to assemble electric models. Another future investment will focus on a new EV model to be built in Mexico for the North American market.

Human Capital

Continental is cutting around 5.5k jobs to reduce costs by $428M annually for its automotive unit, which produces software, safety features, and autonomous driving technology.

Due to challenging market conditions, Stellantis is offering buyout packages ($) to 6.4k US salaried employees. This coincides with a tentative labor agreement with the UAW proposing double-digit raises and $19B in manufacturing investments. CEO Carlos Tavares acknowledges the need for savings to offset higher EV costs.

Labor

The UAW has ratified a labor agreement with GM following a closely contested vote. The deal was approved by a 55% to 45% margin, secured by solid support from GM's component plants, parts distribution centers, and battery plants, offsetting opposition from higher-paid assembly plant employees.

The agreement includes an immediate 11% raise for top wage earners, a $5k ratification bonus, and significant wage increases for newer employees. The contract, running through April 2028, also encompasses about $2B in new investments for EV and parts production at three plants. It also brings employees working at GM's JV battery plants under the same agreement.

In contrast, UAW's deals with Ford and Stellantis are passing with larger margins.

Unifor Local 444, representing 900 workers at Magna's Integram seating plant (supplying Stellantis) in Lakeshore, Ontario, has reached a tentative agreement, ending a strike that began on November 8.

Mergers, Ventures, Acquisitions

General Motors has acquired Tooling & Equipment International (TEI), a key supplier instrumental in Tesla's gigacasting technology development. This acquisition, part of GM's strategy to close the gap with Tesla ($), is significant as TEI has been deeply involved in pioneering gigacasting.

This process allows large car body parts to be cast in one piece, enhancing manufacturing efficiency and cost-effectiveness. TEI's sand casting and rapid prototyping expertise has been pivotal in Tesla's ability to develop molds for its EVs, including the Model Y, Cybertruck, and Semi truck. GM's acquisition of TEI gives it direct access to this critical technology and expertise, positioning it to make more efficient and cost-effective vehicles.

BASF and SK On will collaborate to explore the North American and Asia-Pacific lithium-ion battery markets, focusing on producing and recycling cathode active materials.

Opening

Rivian has finalized a deal for a 1.8k-acre site near Atlanta, Georgia. The $5B, 16M sq ft facility will produce R2 vehicles for the mass market, with an initial annual production capacity of 200k EVs starting in 2024. The second phase increases capacity to 400k vehicles and is planned for completion by 2030.

Forvia has opened a new 323k sq ft electronics manufacturing facility ($) in Fengcheng, China. The plant, Forvia's largest, will produce up to 2M electronic components annually for in-vehicle displays, cockpits, and automated driving systems.

Audi FAW NEV Company's JV production facility in Changchun, China, is reporting progress since it began construction in June 2022. The new plant is Audi's first in China focused solely on EVs and will commence production by the end of 2024.

Forge Nano, a US startup supported by Volkswagen, plans to establish a gigawatt-hour-scale battery factory in Morrisville, North Carolina. The facility, scheduled to begin construction in the first half of 2024 and start production in 2026, will produce 21700 and 18650 lithium-ion battery cells. The cells are intended for defense, aerospace, and specialty EV markets.

E-One Moli Energy, a subsidiary of Taiwan Cement, will invest $796M to build an EV lithium cell factory in British Columbia, Canada. The factory will start production in 2028, with an annual capacity of 2.8 GWh.

Production Decrease

Fisker revised its 2023 production forecast for the Fisker Ocean to 13k-17k units, down from the initially projected 20k-23k units.

The California-based automaker, which delivered its first Ocean in May, has struggled with the pace of deliveries despite producing 4.7k units in Q3 and delivering 1.1k of them.

Fisker, which outsources manufacturing, plans to enhance logistics by leasing facilities and increasing staff to match production with deliveries. Amid these changes, Fisker also adjusted pricing on various Ocean models and is preparing to launch two more EVs - the Pear crossover and the Alaska electric pickup.

Production Increase

Chinese smartphone manufacturer Xiaomi plans to launch its first EV in February 2024 and start mass production in December.

Regulation

NYTimes: The Daily Podcast: Biden's Electric Car Problem

Shutdown

Volkswagen has announced a halt in producing its ID.4 and ID.7 EVs at the Emden plant in Germany due to a shortage of electric motors. This is VW's second production pause, following a similar stop at its Zwickau factory earlier in the week. The Emden plant, a key hub in Europe's automotive industry, had previously seen significant investment from VW to advance EV production.

Supply Chain

The Panama Canal is facing ongoing draft and transit limitations due to dry weather and underdeveloped reservoirs. These will impact container ship transits and stowage weights until at least June.

These restrictions have led to increased usage of the Port of Lázaro Cárdenas in Western Mexico and raised concerns about the canal's future viability in the face of climate change.

Meanwhile, the Suez Canal, unaffected by these limitations, is gaining attention due to its ability to handle the world's largest ships and the shifting trade sourcing from Southeast Asia and the Indian Subcontinent. However, rising political tension in the Middle East and events such as the grounding of the Ever Given in 2021 create uncertainty.

In the meantime, US East Coast ports are preparing for this shift with significant investments in infrastructure to accommodate larger vessels.