Automotive Supply Chain Risk Digest #362

January 12 - 18, 2024, by Elm Analytics

Change In Management

With upcoming earnings reports, it's the week to signal a shift in strategies with management changes:

• Carlos Zarlenga has been named the new COO for North America at Stellantis, succeeding Mark Stewart. Zarlenga previously served as President of Stellantis Mexico.

• Mark Stewart, previously the North America COO at Stellantis, has been elected as the new CEO and president of Goodyear, following Rich Kramer, who announced his retirement in November.

• Kristian Aquilina has been promoted to president and managing director of GM Canada, succeeding Marissa West, following his previous role as vice president for vehicle sales, service, and marketing at GM Canada.

• Vinay Shahani $, previously Lexus' marketing chief, has been named Nissan North America's senior vice president of US marketing and sales, as Michael Colleran is retiring on March 31.

• Lucid appointed Alexander Lutz as its new Managing Director for Europe; Lutz was previously at Polestar, Audi, and Maserati.

• Massimo Frascella, the influential design director of Jaguar Land Rover known for his significant role in designing models like Range Rover, Defender, and Discovery, has resigned to pursue new opportunities, with Gerry McGovern remaining as Chief Creative Officer.

Closing

The Martinrea Fabco Metallic plant in Dresden, Ontario, Canada, has permanently shut its doors, primarily due to the automotive industry's shift towards EVs.

The closure follows the final production of models, such as the Jeep Grand Cherokee, Chrysler 300C, Dodge Charger, and Challenger, with the remaining programs relocated to Martinrea's Ridgetown plant.

Expanding

Hyundai will invest $845M to upgrade its manufacturing plant in Talegaon, Maharashtra, India.

Following Hyundai's acquisition of the plant from GM in 2021, the expansion aims to increase the annual production capacity to 1M vehicles, with mass production scheduled to restart in 2025.

This move is part of Hyundai's strategy to make India a key manufacturing base for its EV line, particularly after its sales decline in China.

Human Capital

Due to weak demand, Stellantis will temporarily lay off approximately 2.2k workers at its Mirafiori plant in Turin, Italy, from February 12 to March 3, affecting 1.2k employees in producing the electric Fiat 500 and 1k for Maserati models.

Similarly, an operational review in the US has reduced 539 supplemental employees $ across Stellantis' manufacturing facilities. This decision is aligned with enhancing efficiency and productivity, following new labor agreements with the UAW that improved pay and offered temporary workers a more straightforward path to full-time status.

Mergers, Ventures, Acquisitions

Hyundai Motor has sold its factory $ in Chongqing, China, to Yufu Industrial Complex Construction for $225.9M, less than half the initial asking price. This sale is part of Hyundai's strategy to optimize operations in China and reduce its number of factories in the country to three. The Chongqing plant, operational since August 2017, is the second factory Hyundai has sold in China, following the sale of a Beijing plant in 2021.

Opening

Tata Passenger Electric Mobility commenced production of ICE and EV models at its new factory in Sanand, Gujarat, India. The factory, acquired from Ford India, spans 460 acres with an initial manufacturing capacity of 300k units annually, scalable to 420k.

Neta, a brand under Chinese EV manufacturer Hozon Auto, broke ground on its third overseas factory in the Rembau Chembong Industrial Estate, Negeri Sembilan, Malaysia, and is slated to begin production in 2025.

Antolin has inaugurated its first factory in Chakan, Pune, India, specializing in lighting, HMI systems, and electronics. The factory, which will employ 200 workers, spans approximately 34.4k sq ft and will supply Tata, Suzuki, Toyota, Mahindra, and Skoda.

Production Decrease

Nissan has postponed the production $ of two EVs at its Canton, Mississippi, assembly plant for the second time, citing the need to enhance product competitiveness. The production of the Nissan sedan, codenamed LZ1F, is now scheduled to begin in November 2026, while the Infiniti EV, codenamed LZ1E, will start in April 2027. This delay reflects broader industry trends, with automakers reevaluating EV production targets amid slowing market growth and increasing EV inventory levels.

Nissan also informed suppliers it may shift the production of the next-generation Rogue crossover from Smyrna, Tennessee, to Japan if it cannot reduce its purchasing costs in the US. The company is seeking an average 20% reduction in parts pricing for the Rogue, with some suppliers being asked for cuts up to 30% $.

"But I've never heard of [an original equipment manufacturer] asking for this magnitude of price reduction and threatening to move a whole vehicle production to another country… Nissan could be concerned about union organizing efforts increasing, and [it's] trying to find ways to cut their costs."
- Daniel Rustmann, Butzel Long

The potential relocation could significantly impact Nissan's Smyrna plant, which heavily relies on the Rogue, accounting for 200k vehicles annually (40% of its output).

Stellantis' Maserati has paused the development $ of its Quattroporte Folgore, an electric version of its large sedan, due to performance concerns. This decision marks the third delay for Maserati's EV lineup, following similar postponements for the GranTurismo and Grecale SUV electric models.

The company, aiming for an all-electric model range by 2030, is also reevaluating the business case for the Quattroporte Folgore and has requested price reductions from suppliers.

Meanwhile, production of the fuel-powered Quattroporte ended in Q4-2023, with temporary layoffs announced at Stellantis' Mirafiori plant in Turin, impacting 1k workers.

Swedish EV maker Polestar reported that its 2023 vehicle deliveries did not meet the targeted figures, reaching only 54.6k units against a goal of about 60k. This shortfall is attributed to weak demand for its luxury models in a challenging economic environment with high inflation and elevated interest rates.

The company's focus on premium sales over mass market volumes and reluctance to reduce prices further impacted its performance.

Additionally, a shift in production from Polestar 2 to the new Polestar 4 in China contributed to the lower delivery numbers.

Regulation

S&P Global Mobility: 2024 US Presidential Election and the Auto Industry

Shutdown

Volvo suspended production at its plant in Ghent, Belgium, for three days this week owing to delayed deliveries of gearboxes caused by the recent attacks in the Red Sea.

Suzuki Motor suspended production at its car plant in Esztergom, Hungary, through January 21, 2024. This halt is in response to delivery delays of engines and other parts from Japan, caused by recent attacks on commercial vessels in the Red Sea by the Iran-backed Houthi militia in Yemen.

Michelin will suspend operations at its four factories in Spain, among the company's largest rubber producers, on January 20-21, following a similar shutdown on January 13-14. These suspensions are a response to delivery delays of raw materials stemming from the ongoing crisis in the Red Sea that has disrupted vital global shipping routes.

By promptly rerouting car parts shipments $ around South Africa, Volkswagen has effectively avoided the production disruptions plaguing Tesla, Volvo, and Suzuki due to the Red Sea crisis. This strategic move began in December and added two weeks to delivery times, allowing VW to maintain a steady parts supply and adapt its production schedules accordingly.