Automotive Supply Chain Risk Digest #399
September 20 - 26, 2024, by Elm Analytics
Contents
BANKRUPTCY
Wrena files for bankruptcy amid lawsuit
EARNING DIP
Northvolt faces financial troubles cutting staff
HUMAN CAPITAL
Stellantis lays off workers in Michigan
LABOR
UAW reaches tentative agreement with Ford
Potential port strike may disrupt auto supply
Volkswagen union negotiations may lead to layoffs
Italian workers plan strike due to Stellantis output
GM Ingersoll workers secure a pay raise
MERGERS, VENTURES, ACQUISITIONS
Hyundai and Kia launch project for cheaper EVs
Geely partners with Tasco Auto for Vietnam plant
OPENING
Shinsung Petrochemical to build a facility in Georgia
Laepple redeveloping Detroit plant into metal stamping site
PRODUCTION DECREASE
BJEV cuts production capacity amid losses
PRODUCTION INCREASE
Stellantis and Leapmotor to produce EVs in Poland
REGULATION
Auto industry braces for USMCA review in 2026
White House launches fund to help suppliers transition to EVs
Bankruptcy
Wrena has filed for Chapter 11 bankruptcy after losing a $30M lawsuit $ with Eaton over parts defects tied to clutch failures. Wrena, owned by Angstrom, supplies stamped tubular components and assemblies to customers like Tesla, Driv Automotive, BWI Group, Skyway Precision, and Hanwha Advanced Materials.
The company blamed the bankruptcy on the lawsuit, rising costs, and other market pressures. Wrena is now seeking court approval to sell the business and keep operations running to save 50 jobs.
Earning Dip
Northvolt, a Swedish battery company, is facing financial challenges and is cutting a fifth of its global staff while halting the expansion of its main factory in Sweden. Once seen as a key player in Europe's electric vehicle industry, the company is struggling to stay afloat amidst a liquidity crunch.
Northvolt's production woes and the slowing demand for electric vehicles have led to financial troubles despite securing significant funding from companies like Volkswagen Group and BMW.
The company's ambitious plans and rapid expansion have resulted in operational difficulties, forcing it to seek restructuring advice and consider contingency planning.
Human Capital
Stellantis laid off 177 supplemental workers and 14 full-time employees at its Sterling Heights Assembly Plant in Michigan. The company cited different reasons for the layoffs, including the seasonal end-of-summer vacation coverage for the supplemental employees and broader market challenges affecting the automaker's operations.
The layoff notifications, delivered through a robocall, surprised the United Auto Workers Local 1700, which expressed concern over the unexpected terminations. Stellantis attributed the decision to ongoing market pressures and the need to improve operational efficiency.
Labor
The UAW representing Ford's tool and die workers at the River Rouge complex in Dearborn, Michigan, has reached a tentative agreement with Ford, averting a planned strike.
The unit, which employs over 500 skilled tradespeople out of the 6k workers at the facility, will vote on the contract in the coming days. Critical issues in the negotiations included job security, wage parity, and work rules.
A potential October 1 strike involving 45K union workers at US East and Gulf Coast ports could severely disrupt automotive manufacturing by cutting off critical supply chains. These ports handle $37.8B in vehicle imports annually, along with essential auto parts, mainly from Europe, which are more difficult to reroute.
A strike could lead to delays in parts shipments, create significant backlogs, and raise shipping costs, further straining automakers already dealing with supply chain issues.
Volkswagen and the IG Metall union failed to reach an agreement over wages, with the possibility of mass layoffs looming in Germany, potentially affecting around 30k workers. The union threatened strikes starting in December, while Volkswagen stated that plant closures in Germany may be necessary to stay competitive.
Italian automotive workers are planning a strike on October 18 in response to declining production at Stellantis' plants. The leading metalworkers unions, including FIM-CISL, organized the strike and a national demonstration in Rome. They are protesting a 70% drop in Stellantis' Italian output over the past 17 years, with projections for only 500k vehicles produced in 2024 compared to 751k in 2023. Stellantis and the Italian government have discussed ways to boost production, but no agreement has been reached.
Workers at the CAMI plant in Ingersoll, Ontario, have ratified a new contract with General Motors, granting some employees a 20% pay raise and aligning their earnings with other Big Three workers. The two-year agreement eliminates a pay lag, resulting in a 15% wage increase for production line workers and a 20.25% increase for skilled trade workers.
Mergers, Ventures, Acquisitions
Hyundai and Kia have launched a new project to develop LFP battery materials for lower-priced EVs, teaming up with Hyundai Steel and EcoPro BM. The four-year initiative is supported by Korea's Ministry of Trade, Industry, and Energy to reduce import reliance and establish a stable supply chain for electric vehicles.
Opening
China's Zhejiang Geely Holding Group has partnered with Vietnamese distributor Tasco Auto to build a new vehicle manufacturing plant in Thai Binh Province, Vietnam. The joint venture will produce Geely and Lynk & Co vehicles, with an initial capacity of 75k vehicles per year.
The $168M project, set to break ground in 2025, will assemble completely knocked down vehicles imported from China, with plans for future local component sourcing. The venture also includes investments in automotive R&D, a technical training university, and systems for vehicle connectivity. The first vehicles are expected to be delivered in early 2026.
Shinsung Petrochemical, an automotive supplier specializing in sealants, will build an $11.2M manufacturing facility in Lyons, Toombs County, Georgia. Shinsung will be a key supplier for Hyundai and its new Metaplant in Bryan County. Construction is expected to be completed by 2025.
Germany's Laepple Automotive plans to invest $93.4M to redevelop the former Stellantis Mount Elliott Tool and Die facility in Detroit into a metal stamping plant. The facility, idled by Stellantis in 2018, will produce stamped auto parts such as hoods, fenders, doors, and trunk lids and serve as Laepple's US headquarters.
Production Decrease
BJEV, BAIC's EV subsidiary, has reduced its production capacity from 320k to 120k vehicles by consolidating three of its production sites into one. This decision reflects the company's challenges amidst declining sales and continued financial losses.
Despite being the first licensed EV producer in China and a previous leader in electric passenger car sales, BAIC BluePark has experienced a decline in sales and revenue, with reported losses in recent years.
Production Increase
Stellantis and Leapmotor plan to start production of their Leapmotor T03 small EV in Poland by the end of the year. The joint venture will assemble the T03 from kits imported from China, allowing Leapmotor to avoid EU tariffs.
Regulation
The auto industry is preparing for the upcoming United States-Mexico-Canada Agreement (USMCA) review in 2026. The three countries involved, the US, Canada, and Mexico, must confirm in writing by July 1, 2026, whether they want to continue with the free trade agreement.
The upcoming US and Canadian elections may influence the review process $, potentially impacting automotive manufacturing in North America. The review could result in significant changes to the agreement or cast its long-term future in doubt.
The industry's top priority is to ensure the agreement's continuity, as any uncertainty about its future could affect the region's global competitiveness and investment attractiveness.
Issues such as the impact of the COVID-19 pandemic, supply chain disruptions, and labor shortages are expected to be key discussion topics during the review.
The White House announced the launch of the Drive Forward Fund, a $1B initiative by Monroe Capital LLC to provide loans to small- and medium-sized auto suppliers to support their transition from producing ICE components to EV parts.
Backed by government-guaranteed lending through the US Small Business Administration, the fund will help these suppliers refinance, grow, and diversify as the industry shifts to cleaner vehicles.
This initiative includes a $9.1M Treasury Department grant to support Michigan auto suppliers. New tariffs on Chinese EVs and batteries and stricter emissions rules are driving automakers to overhaul supply chains and modernize their parts sourcing.