Automotive Supply Chain Risk Digest #384
Automotive Supply Chain Risk Digest #384
June 7 - 13, 2024, by Elm Analytics
Contents
Hino closing Arkansas factory
Suzuki shutting Thailand plant
INEOS Styrolution closing Ontario site
Audi investing $1B in Puebla
Ford cutting 1.6k jobs in Valencia
Forvia CEO discusses Mexico challenges
UAW reaches tentative Ultium Cells deal
Innoplate opens fuel cell site
BorgWarner opens Coahuila plant
POSCO constructing Poland EV plant
Autoliv breaks ground in Hefei
GM reduces 2024 EV target
Germany may pause supply chain law
Biden administration sets fuel economy rules
Senate expands BMW supplier investigation
Thailand attracts EV investments
EU places tariffs on Chinese EVs
Bloomberg NEF: EV Outlook 2024
Closing
Hino Motors plans to close its Marion, Arkansas, factory and lay off 1,300 workers over the next three years as it exits the auto parts business.
The company saw a loss of $210M in fiscal year 2024 based on rising operational costs and a decline in profitability.
The plant, which produces rear axles and suspension components for Toyota's Tundra and Sequoia models, is Hino's largest US site. The company is also undergoing a merger with Mitsubishi Fuso Truck and Bus Corp.
Due to lower sales and a global production structure review, Suzuki is set to shut down its Thailand plant by the end of 2025.
The plant, which has been in operation since 2012, will be replaced by importing fully built units from ASEAN, Japan, and India.
INEOS Styrolution has announced the permanent closure of its styrene monomer production site in Sarnia, Ontario, by June 2026, citing worsening economic viability and significant upcoming investment needs.
The company plans to support affected employees and ensure a responsible closure process for the site, which is currently shut down due to regulatory orders.
Styrene monomers are used to produce automotive components like exterior body panels and interior trim.
Expanding
Audi announced a $1B investment in EV projects in Puebla, Mexico. This investment will add 500 new personnel and include installing infrastructure to produce its "e-tron" vehicles.
Audi Mexico's plant in San Jose Chiapa, which already employs 5.3k people, will spearhead this initiative.
Human Capital
Ford plans to cut up to 1.6k jobs at its Valencia assembly plant, adding to the 1.1k job cuts announced last year.
The company, employing about 4.7k workers at the plant, will permanently eliminate 600 jobs while negotiating a temporary solution for the remaining 1k jobs until production of a new hybrid vehicle begins in 2027.
The plant, currently producing the Kuga SUV, aims to produce 300k units of the latest hybrid car annually starting in 2027.
Industry Directions
Patrick Koller, the CEO of Forvia, recently discussed the challenges of doing business in Mexico $ with Automotive News.
"Security is an issue ... Inflation is high, and labor inflation is high. Labor availability is becoming an issue. I'm not saying it's better in the US, but we are also starting to have problems there. So we have to think about it."
- Patrick Koller, CEO of Forvia
Koller also highlighted issues such as local corruption and the loss of trucks transporting parts.
However, he made it clear that despite these difficulties, decisions on future investments, like building a factory for hydrogen tanks, are strategically influenced by customer assembly locations.
Koller noted the slower pace of vehicle electrification in North America compared to Europe and China and emphasized the importance of suppliers adapting strategies based on each regional market.
Labor
The UAW reached a tentative agreement with Ultium Cells' Lordstown, Ohio, factory, which produces EV batteries for General Motors.
The contract covers 1.6k workers and aims to enhance pay and safety, raising a new wage of $30.50 per hour to $35 over three years. The contract also includes provisions for full-time safety representatives and an industrial hygienist to address concerns about high-voltage electricity and harmful compounds.
If ratified, this agreement will likely serve as a model for similar efforts at other battery plants.
Opening
Innoplate, a JV between Schaeffler and Symbio, inaugurated its new production site for fuel cell bipolar plates in Haguenau, France. With an initial capacity of 4M plates, the facility aims to produce 50M annually by 2030, supporting hydrogen mobility in Europe.
BorgWarner opened its third plant in Coahuila, Mexico. The 192k square foot facility, announced in March 2023, will produce starter coils, thermostats, and chillers.
South Korea's POSCO began constructing a new EV traction motor core plant in Brzeg, Opole Voivodeship, Poland. The 1M sq ft facility is set to be completed by mid-2025 and will initially produce 1.03 million traction motor cores for Hyundai and Kia EVs in Europe. POSCO aims to scale production to 1.2M drive motor cores annually by 2030.
Autoliv broke ground on its new steering wheel factory in Hefei, China. The 215k sq ft factory is set to complete its first phase by 2025, with a second expansion planned. Once fully operational, the facility will eventually cover 538k sq ft and have an annual output of 4M units.
Production Decrease
General Motors is reducing its 2024 EV production target from 200k-300k units to 200k-250k units due to slower-than-expected demand. GM also announced an investment of $850M in its self-driving subsidiary, Cruise.
Regulation
Germany is contemplating a two-year pause on its supply chain due diligence law to reduce the bureaucratic burden on companies until a European directive takes effect in 2026.
The current law, effective since January 2023, mandates companies with over 1k employees to monitor suppliers' human rights and environmental standards.
The Biden administration has set vehicle fuel economy rules through 2031, increasing CAFE requirements to 50.4 mpg. This is lower than the originally proposed 58 mpg by 2032.
The updated rules, which were influenced by automaker lobbying, will lower compliance penalties.
Environmental groups have criticized the changes as not going far enough, while automakers have welcomed the decision, citing the difficulties of transitioning to electric vehicles.
The Senate Finance Committee, led by US Senator Ron Wyden, is expanding its investigation into BMW's use of electronic components from banned Chinese supplier Sichuan Jingweida Technology Group (JWD).
The probe revealed that BMW imported at least 8k Mini Coopers with parts from JWD, violating the 2021 Uyghur Forced Labor Prevention Act (UFLPA).
Lear Corp, a direct supplier for BMW, received components from Bourns Inc., which sourced parts from JWD.
Wyden has requested that BMW verify if other products contain JWD parts and outline actions to address improper imports. BMW previously stated it had stopped importing affected products and would replace specific parts.
The investigation highlights ongoing concerns about forced labor in supply chains and compliance with US import laws, which could impact BMW's operations and potentially other automakers.
Thailand's regulatory changes and attractive incentives position it as a critical player in the global EV market, enhancing its capacity to become a significant production and export hub.
The country is attracting substantial investments from Chinese automakers and battery suppliers.
Recent developments include Neta Auto's factory with a 20k annual vehicle capacity, GAC Aion's plant slated for 50k units per year, Great Wall Motor's mass production of GWM Ora 03, and Changan Automobile's upcoming 100k unit factory.
The Thai government's updated EV policy, EV 3.5, focuses on purely battery-powered vehicles and offers subsidies to boost EV production.
Additionally, local production of EV batteries is set to grow, with BMW and Svolt establishing facilities in the country.
The EU has decided to place extra tariffs on EVs imported from China, ranging from 17.4% to 38.1%. The goal is to protect European manufacturers from unfair competition.
These tariffs will be effective from July 4 and will be based on the level of cooperation that Chinese manufacturers like BYD, Geely, and SAIC have with European officials.
European automakers with operations in China are concerned that these tariffs will raise prices and reduce demand for EVs.
Risk Analytics
Bloomberg NEF: Electric Vehicle Outlook 2024
