Automotive Supply Chain Risk Digest #398

September 13 - 19, 2024, by Elm Analytics

Contents

CLOSING

• Yanfeng to close Missouri plant in November

• VW, SAIC closing Nanjing factory amid sales drop

CYBER SECURITY

• Foley on Industry 4.0 cybersecurity strategies

LABOR

• UAW to strike Ford's River Rouge unit

• UAW files grievance over Stellantis' Durango shift

• UNIFOR, GM reach tentative deal at CAMI

MERGERS, VENTURES, ACQUISITIONS

• Waymo, Hyundai in talks for self-driving cars

RECALLS

• VW to furlough 200 amid ID.4 recall

• GM issues stop-sale for GMC Canyon due to headlamp defect

REGULATION

• Volkswagen audit in Xinjiang fails international standards

• Biden extends review of Nippon Steel's US Steel acquisition

RISK ANALYTICS

• OEMs slowing down EV investments

• Suppliers rethinking strategies amid EV uncertainty

SHUTDOWN

• Ineos halts Grenadier SUV production due to supplier issues

• GM idles Fort Wayne Assembly plant over supply chain issue

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Closing

Yanfeng, a Chinese supplier, plans to close $ its Riverside, Missouri plant in November 2024. This closure will result in the layoff of 444 workers.

The decision to close the plant is linked to General Motors ending production of the Chevrolet Malibu, for which Yanfeng provided components. A formal layoff notice has already been filed in anticipation of the plant's closure.

Volkswagen and its Chinese partner SAIC plan to close a factory in Nanjing, China, that produces VW Passat and Skoda cars due to shrinking demand for combustion-engine vehicles.

The closure, expected next year, is part of a broader strategy to adjust to declining sales and the rapid shift to EVs in China. VW and SAIC are also reviewing the future of the Skoda brand in China after a steep sales decline.

Several other plants, including one in Shanghai, have reduced output or been repurposed for EV production. The closure marks a significant retreat from VW's largest market as it grapples with the global transition to EVs.

Cyber Security

Foley: Cybersecurity in the Age of Industry 4.0 – Part 2

Labor

The UAW announced that workers at Ford's River Rouge Tool and Die unit will strike on September 26, 2024, if contract issues remain unresolved. The potential strike at a critical Ford facility highlights ongoing labor tensions that could impact production and strain the auto supply chain.

The UAW has also filed a grievance against Stellantis over concerns that production of the Dodge Durango, currently built in Detroit, may be relocated to the Windsor Assembly Plant in Canada by 2027.

The union claims the 2023 collective bargaining agreement guarantees that US workers will continue producing the Durango and its future generations in Detroit.

Stellantis has yet to confirm the move but plans to introduce a new two-row Dodge SUV, codenamed "Stealth," in Windsor, potentially replacing the Durango. Stellantis denied any violation of the contract and said it would communicate its plans in due time.

UNIFOR and General Motors have reached a tentative agreement for workers at the CAMI Assembly plant in Ingersoll, Ontario, following a challenging period of rotating layoffs due to Ultium battery shortages. Details of the deal will be shared with union members at a ratification meeting scheduled for Sunday.

The agreement is expected to bring relief to over 1.1k workers impacted by reduced hours and inflation, with GM set to reinstate two production shifts by January 2025.

Mergers, Ventures, Acquisitions

Waymo is reportedly in discussions with Hyundai to manufacture self-driving vehicles using Hyundai's Ioniq 5 electric platform, potentially replacing current models sourced from China's Zeekr.

The talks have occurred amid US tariffs on Chinese EVs, set to take effect on September 27, 2024. Waymo is currently validating its 6th-generation self-driving technology on Zeekr vehicles, but the partnership with Hyundai may help the company sidestep trade restrictions.

Hyundai has not confirmed any decisions regarding the partnership, and Zeekr stated its collaboration with Waymo remains unchanged.

The potential shift to Hyundai's Ioniq 5 could help Waymo navigate upcoming trade barriers while expanding its autonomous vehicle fleet in the US.

Recalls

Volkswagen will furlough about 200 employees at its Chattanooga plant starting next week due to a recall of nearly 98k ID.4 SUVs caused by faulty door handles that may allow water ingress, potentially causing the doors to open unexpectedly while driving.

Production of the ID.4 will be paused until a fix is found, which could extend until early 2025. Volkswagen stated that affected workers will receive 80% of their base compensation and continue to receive benefits during the furlough. The company reassured that its commitment to the ID.4 and its BEV lineup remains strong.

The production halt and furloughs underscore how quality control issues can lead to production disruptions, affecting both supply chain continuity and workforce stability.

General Motors has issued a stop-sale order on specific 2024 GMC Canyon models due to a headlamp defect that causes the headlights to flicker, failing to meet Federal Motor Vehicle Safety Standard regulations.

About 13.2k units are affected, with 40% currently in dealer inventory or transit. The issue involves a software defect in the headlamp module, which GM plans to fix by replacing the affected part. Dealers have been instructed not to sell or trade the impacted vehicles until the issue is resolved.

Regulation

According to the Financial Times, an audit commissioned by Volkswagen into its Xinjiang, China plant, jointly owned with SAIC, failed to meet fundamental international standards.

The audit, intended to assess labor conditions amid forced labor concerns, revealed that worker interviews were live-streamed to a law firm in Shenzhen, and only managers were questioned about forced labor.

Volkswagen claimed that the audit followed the SA8000 standard, but it was later found that neither the auditing firm nor the Chinese law firm involved was accredited for such audits.

The audit found no signs of forced labor, but concerns over the methodology led investors to call for further checks.

The flawed audit raises concerns about transparency and human rights in supply chains, potentially harming Volkswagen's reputation and compliance with international ethical standards.

The Biden administration has given the Committee on Foreign Investment in the United States an extra three months to review Japan's Nippon Steel's acquisition of US Steel due to national security concerns.

US Steel CEO David Burritt is confident that the $15B deal will benefit America's national security and economy despite facing bipartisan opposition.

However, the United Steelworkers union strongly opposes the deal, citing concerns over national defense risks and pensions.

Risk Analytics

S&P Global: Behind the Headlines: OEMs gently braking on EV investment

Executives at major suppliers are rethinking their risk management strategies $ in response to the uncertainties of electrification. This shift is influenced by automakers' adjustments to their EV targets and plans, particularly in North America.

Some suppliers, like Magna, are engaging in discussions with customers to restructure contract terms, addressing potential shortfalls in vehicle production volume. This could involve sharing the capital risk if vehicle volumes fall below expectations.

Bosch's North American president, Paul Thomas, underscores the importance of collaboration and risk sharing, particularly in emerging technologies in software and engineering. He emphasizes that in such a rapidly changing landscape, it's crucial for all industry players to work together and share the risks. Despite the slowdown in EV sales growth, major suppliers like Bosch remain resolute in their plans for US silicon carbide chip production, as these chips have applications beyond automotive use.

Global suppliers such as Magna, Bosch, and Valeo are leveraging their presence in markets with higher EV demand to justify investments in new technologies while also relying on their teams in China and Europe to lead EV developments.

Valeo, for instance, has an advantage with some of its EV applications being in their second or third generation due to their initial development for the stronger EV markets in Asia and Europe. This strategic approach enables these global suppliers to navigate and mitigate the risks associated with EV investments more effectively.

Shutdown

Ineos will halt production of its Grenadier SUV and Quartermaster pickup at its Hambach, France factory starting September 19, 2024. This decision is due to financial troubles at a critical supplier.

The unnamed supplier provides a crucial trim part necessary for vehicle sales and is currently in a pre-insolvency situation.

Ineos CEO Lynn Calder stated that the company is exploring alternative suppliers but could not estimate when production will resume. It may possibly resume by the end of the year or early next year.

The shutdown comes as Ineos prepares to launch in Mexico and China, with global demand remaining strong.

General Motors will stop production at its Fort Wayne Assembly plant in Indiana for the week of September 23, 2024, due to an undisclosed supply chain issue $. The plant manufactures light-duty Chevrolet Silverado and GMC Sierra pickups.

Three component plants in Indiana and Michigan—Marion Metal Center, Grand Rapids Operations, and Lansing Grand River Stamping—will also be idled for the supply issue during the same period. This follows previous downtime earlier in the year as GM retooled for the next-generation Silverado and Sierra.

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