Automotive Supply Chain Risk Digest #381

Christine Feuell $ has been appointed as the new CEO of Ram, tasked with reversing the brand's two-year decline in US sales and overseeing the launch of its first electric pickup. Feuell, who will also continue her efforts at Chrysler, succeeds Tim Kuniskis, who is retiring.

Bentley has appointed Mike Rocco $ as the new CEO for the Americas, succeeding Christophe Georges, who will become Bentley's global sales and marketing director. Rocco, a former Toyota and Nissan executive, has been with Bentley since 2017.

Expanding

Toyota is planning a $531.7M expansion of its San Antonio, Texas, plant, which could increase its size by over 500k square feet.

Germany's Webasto is expanding its EV battery pack production at its Dangjin, South Korea plant, increasing its annual capacity to 300k units by 2025. The expansion adds 100k units to the existing capacity, leveraging new equipment across more than 161k sq ft of new production and storage space. This move came two years after Webasto began mass-producing EV battery packs for customers like Hyundai Motor Group in Korea.

Industry Directions

Chinese EV manufacturers like Nio and Xpeng are significantly extending supplier payment times, now taking around 295 and 221 days, respectively, compared to Tesla's consistent 101 days. This situation reflects the intense pressure in China's EV market, characterized by sluggish economic growth and fierce price competition. The phasing out of EV subsidies in 2022 has exacerbated financial strains, pushing smaller manufacturers like WM Motors and Human Horizons Group to the brink. Delayed payments are causing financial strain on auto-parts suppliers, potentially leading to industry consolidation as weaker suppliers face bankruptcy.

Nissan has paused the development of two battery-powered sedans in the US while expanding its EV lineup to five models. Reflecting consumer preference shifts, Nissan is prioritizing battery-powered crossover SUVs. Despite the pause, Nissan plans to introduce seven new EV models in the US by 2026 as part of its accelerated global EV transition.

Labor

Workers at Mercedes-Benz factories near Tuscaloosa, Alabama, voted 56% to 44% against joining the UAW. The results mark a significant setback for the union's efforts to organize in the South. However, the UAW remains steadfast in its commitment to continue its efforts, as emphasized by UAW President Shawn Fain. The vote, which saw nearly 4.7k ballots cast, is viewed as a critical test of the UAW's ability to expand its influence in the region. Mercedes, which produces SUVs in Vance and EV battery packs in Woodstock, promised improvements under new local management following the vote.

Litigation

A Michigan judge ruled that fastener manufacturer Kamax must continue supplying parts $ to Stellantis, rejecting Kamax's attempt to dissolve a preliminary injunction. This decision follows Stellantis's lawsuit in February after Kamax stopped shipments over cost disputes. The judge's order maintains the March 2 injunction, compelling Kamax to fulfill its contractual obligations. This ruling is part of ongoing litigation where Stellantis addresses pricing disputes with multiple suppliers, aiming to avoid production and vehicle delivery disruptions. Other automakers, like Ford, are also pushing suppliers for cost reductions amid the transition to EVs.

Mergers, Ventures, Acquisitions

Redwood Materials has announced a collaboration with Ultium Cells LLC to recycle scrap from its facilities in Ohio and Tennessee. They estimate they will handle 10k tons of scrap material annually. Redwood will process the recycled scrap into battery materials and supply them back to battery cell manufacturers.

Opening

PPG is constructing a new 250k sq ft paint and coatings manufacturing plant in Loudon County, Tennessee, its first new US manufacturing facility in over 15 years. The $300M investment also includes enhancements to existing plants in Cleveland, Ohio, and San Juan Del Rio, Mexico. Construction will begin in August 2024, with completion anticipated in 2026.

Nobo Automotive is constructing a new 323M sq ft manufacturing plant in České Budějovice, Czech Republic, to produce BMW seat sets.

Production Increase

Kia plans to ramp up production to sell 70k to 80k units of its new EV3 subcompact all-electric crossover annually in the US, starting in 2025 or later. This ambitious target aims to triple $ Kia's current EV sales volume in the US, which sold 32k EVs in 2023.

Panasonic Holdings plans to more than double its domestic production of EV batteries by 2030 to supply potential customers like Mazda and Subaru. This expansion aims to improve the performance of its Japanese factory and respond to changing demand, particularly after a significant drop in orders from Tesla. Current domestic capacity is about 12 GWh annually, with plans to increase this figure. CEO Yuki Kusumi emphasized the need for greater urgency and execution within the company to meet profit targets amid restructuring efforts, including selling its car parts subsidiary.

Regulation

A US Senate report reveals that BMW imported at least 8k Mini Coopers with electronic components from a banned Chinese supplier linked to forced labor. These parts, sourced from Sichuan Jingweida Technology Group (JWD), were forbidden under the Uyghur Forced Labor Prevention Act (UFLPA). BMW continued to import these vehicles until April and is now taking steps to replace the affected components. The report highlights broader issues with automakers, including Jaguar Land Rover, Volkswagen, and Volvo, who also dealt with parts from JWD.

Risk Analytics

The 24th annual North American Automotive OEM-supplier Working Relations Index® (WRI®) Study by Plante Moran reveals significant changes in automaker-supplier relationships. Toyota and Nissan each gained 30 points, with Toyota achieving its highest score since 2007. Honda and General Motors also improved, while Ford plummeted by 22 points, ranking fifth. Stellantis, despite a minor gain, remains last. The study highlights the importance of equitable cost-sharing, effective communication, and reasonable contract terms amidst the EV transition and rising material costs.

Interested in a deeper dive into the results? Elm Analytics' CCO Sig Huber joined Plante Moran's Dave Andrea, who led the study, on The Automotive Leaders Podcast, episode 124, hosted by Jan Griffiths:

Tesla's manufacturing efficiency stems from its strategy of reducing vehicle parts $, which cuts costs, decreases weight, and requires fewer workers and smaller factories. A teardown by Caresoft Global reveals that the Tesla Model Y's front trunk has just five components compared to 27 in a traditional EV. Innovations such as single-piece castings have reduced the Model Y's parts by 370 from 2020 to 2022, resulting in a 10% weight reduction and a 14% increase in driving range. This streamlined approach allows Tesla to produce vehicles more quickly and cost-effectively, presenting significant challenges for legacy automakers. Tesla's parts reduction strategy highlights its competitive edge in manufacturing, which enables cost-effective production and could pressure traditional automakers to adapt.

Shutdown

Toyota Motor experienced several production stoppages at its Tijuana, Mexico plant in February and March due to labor shortages from suppliers, resulting in 19 days of halts. This caused disruptions to the production of the Tacoma pickup truck, which was compounded by technical issues. Toyota is working closely with its suppliers to lessen the impact, but ongoing workforce shortages pose challenges. The North American subsidiary of Toyota has acknowledged the persistent supply chain disruptions and their efforts to minimize inconvenience for customers.

Automotive Supply Chain Risk Digest