Automotive Supply Chain Risk Digest #379
May 3 - 9, 2024, by Elm Analytics
Contents
Fisker files for reorganization.
Magna expands in Michigan.
GM retools for Bolt production.
Luminar reduces workforce significantly.
Tesla, largest Luminar customer.
Tesla continues dismissals: software, service.
Tesla intensifies layoffs in China.
Motional delays driverless service.
Ford reconsiders European EV strategy.
Auto suppliers face legal challenges.
Rivian, Lucid, Fisker EV outlook.
Stellantis workers authorize strike.
Mergers, Ventures, Acquisitions
CATL pursues global technology licenses.
BMW invests in Mexico plant.
US extends EV graphite deadline.
US funds auto parts EV transition.
Potential US ban on Chinese cars.
Tesla halts German plant production.
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Bankruptcy
Fisker has filed for reorganization in Austria under court protection, similar to Chapter 11 bankruptcy in the US. The filing halted the production of the Fisker Ocean model at the Magna Steyr contract manufacturing facility in Graz. Magna is reducing its workforce by 500 workers and anticipates a $400M revenue hit.
Expanding
However, Magna will bolster its operations in Southeast Michigan $ by opening a new lighting engineering center in Novi, an R&D center in Troy, and increasing manufacturing capacity in Lyon Township. The company's expansion involves a total investment of $39M and adding 363 positions across these sites. This initiative includes significant projects such as $35.2M in manufacturing enhancements in Lyon Township and a $100M seating plant in Auburn Hills to support GM's Orion Assembly.
General Motors announced that it would stop the production of the Chevrolet Malibu at its Fairfax Assembly Plant located in Kansas City, Kansas, in November. The automaker will spend $391M to retool the plant to produce a new Bolt model - part of the latest collective bargaining agreement with the UAW. GM will use its flexible Ultium battery platform to support the production of the Bolt EV. The identical platform will also produce the Cadillac XT4 using the same line. However, the retooling process will cause temporary layoffs until production resumes in late 2025.
Human Capital
Luminar Technologies, which produces LiDAR sensors for AVs, announced it will reduce its workforce by approximately 20%. The company is restructuring in an attempt to decrease operating costs by $50M to $65M annually.
A side note: Luminar's Q1 earnings report revealed that Tesla was its largest customer, having purchased more than $2M of LiDAR sensors this past quarter. Notably, Elon Musk previously dismissed LiDAR as a "crutch" and stated that any company relying on LiDAR for autonomy was "doomed."
Tesla initiated yet another round of layoffs, affecting various departments, including software, service, and engineering. Over the past three weeks, the series of layoffs are cumulatively approaching 20% of its workforce, surpassing the initial 10% reduction announced earlier.
The layoffs have been partly attributed to the company's rapid expansion, the need to eliminate duplicative roles, and a restructuring for future growth. These dismissals coincide with one of Tesla's weaker financial performances, primarily due to lower-than-expected vehicle deliveries.
Tesla is also intensifying its workforce reductions in China amid a significant slowdown in sales within the country's highly competitive EV market. The latest round of layoffs affects various departments at Tesla's Shanghai Gigafactory $, which is responsible for over half of its global production. The dismissals follow an earlier round of job cuts, primarily impacting sales staff.
Despite these layoffs, Tesla recently received approval to deploy its driver-assistance system in China, which is expected to boost revenues. However, the company's market share in China has declined from 10.5% to 7.5% in Q1-2024, reflecting increased competition and weakened consumer demand.
Motional, a joint venture between Hyundai and Aptiv, is postponing the launch of its commercial driverless taxi service until 2026, two years later than initially planned. This delay is part of a broader restructuring to refine its core autonomous vehicle technology and preserve capital.
The company will also reduce its workforce, although it did not disclose specific layoff numbers. Currently, Motional operates autonomous Hyundai Ioniq 5 vehicles for taxi and delivery services in select cities but plans to scale back these operations to focus on technological development.
Industry Directions
Ford has adjusted its ambitions for an all-electric lineup in Europe by 2030, citing weaker-than-expected demand for EVs. Martin Sander, head of Ford's passenger-car business in Europe, indicated at the Financial Times Future of the Car conference that the company may continue to offer plug-in hybrids if market demand persists.
Despite this shift, Ford remains committed to transitioning to electric drivetrains, especially as 2035 legislation will ban most new internal combustion engine vehicles.
Similarly, Cadillac has also scaled back its goals, with plans to continue selling gasoline-powered cars alongside electric models for the foreseeable future.
Auto suppliers increasingly rely on legal expertise to navigate complex challenges $, including cybersecurity breaches, noncompete clauses, payment adjustments, and evolving emissions regulations:
A cybersecurity attack on Yanfeng led to significant financial disputes with Stellantis, highlighting liability issues.
The FTC's ban on most noncompete agreements has spurred suppliers to reconsider how they protect trade secrets.
Suppliers are also negotiating with automakers over extended payment terms due to rising costs associated with the transition to EVs.
Finally, suppliers are adapting to new EPA vehicle emissions standards, balancing the risk of investing in EV technology against uncertain market growth.
These legal and regulatory challenges reflect the broader shifts and uncertainties in the automotive industry, impacting supplier strategies and operations, particularly as they transition to EVs and cope with increasing cybersecurity risks.
The Verge: What Rivian, Lucid, and Fisker tell us about the current state of EVs
Labor
Workers at the Stellantis Warren Stamping Plant in suburban Detroit have voted to authorize a strike over unresolved health and safety issues, including poor ventilation, inadequate ergonomic support, and poor sanitation. Despite the vote, which garnered 72% support among participating members, there are no immediate plans to commence the strike.
The plant is crucial to Stellantis, supplying components for several major models, such as Ram pickups and the Jeep Wrangler and Wagoneer. Both sides continue to negotiate to resolve the grievances without halting production.
Mergers, Ventures, Acquisitions
CATL is actively pursuing technology licensing partnerships with about a dozen carmakers through its License Royalty Service (LRS) model. This strategy facilitates plant construction and operational services. It allows CATL to expand its global presence and open new revenue streams while avoiding many regulatory blockades as the automakers own the plants and produce the cells.
Currently dominating the international market with a 36.8% share, CATL also focuses on developing advanced battery technologies, including second-generation sodium-ion and solid-state batteries. The company aims to start small-scale production of all-solid-state batteries by 2027 and is innovating to improve energy densities and performance under various conditions.
Additionally, CATL is exploring the combination of sodium-ion and lithium-ion batteries within the same pack to enhance performance and broaden application scenarios.
Opening
The BMW Group's San Luis Potosí plant in Mexico started constructing a new Battery Module Production Center as part of an $862M investment to transition towards electromobility. The plant will also see expansions in the body shop, assembly, and logistics areas. The production of the NEUE KLASSE Sports Activity Vehicle will commence at this facility in 2027, following its introduction in other locations, including Debrecen, Hungary, in 2025 and Munich in 2026.
Regulation
The US Treasury and IRS have extended the deadline until 2027 for sourcing graphite, a critical mineral in EV battery production, primarily from China. The extension applies to EV tax credits, allowing vehicles that use graphite from China to qualify for up to $7.5k in credits.
The objective is to provide automakers additional time to establish domestic supply chains for critical minerals. This rule acknowledges the challenges of transitioning to a US-based EV production and the ongoing dependence on foreign critical minerals.
US Vice President Kamala Harris has announced a new initiative allocating over $100M to support small American auto parts manufacturers transitioning to EV production.
The funding is split between two main programs - the Industrial Assessments Center Implementation Grants Program and the Automotive Conversion Grants Program. The Small Business Administration is also enhancing support for these businesses through a new pilot in its lending program.
The US Commerce Department has indicated that the US may ban or impose restrictions on Chinese connected vehicles. The announcement follows a national security investigation into the data vehicles could collect on US citizens and infrastructure.
Automakers and foreign governments have expressed concerns about the inquiry's broad scope and its impact on the industry.
This move highlights the increasing geopolitical tensions around technology and trade, particularly in sectors critical to national security.
Shutdown
Tesla has announced a one-day production halt at its Gruenheide plant in Germany on May 10. The announcement follows reports of a four-day shutdown due to protests against the factory's expansion plans and related environmental concerns.
The plant typically does not operate on weekends, and with the upcoming public holiday, Tesla will pause operations from Wednesday evening until Sunday night.
Charts
