Automotive Supply Chain Risk Digest #407
November 15 - 21, 2024, by Elm Analytics
Contents
BANKRUPTCY
Northvolt reassures Quebec project amid bankruptcy
Meta System struggles with delayed funding
Hycan collapses due to debts, disputes
DISASTER
Hyundai plant accident kills three
HUMAN CAPITAL
Ford cutting 4k European jobs by 2027
1k Nissan US workers accept buyouts
Bosch reduces hours for 450 employees
LABOR DISPUTE
Volkswagen workers propose cost-saving measures
MERGERS, VENTURES, ACQUISITIONS
ExxonMobil, LG Chem agree on lithium deal
OPENING
Mubea inaugurates composite springs plant
PRODUCTION DECREASE
Stellantis delays Ram EV to 2025
PRODUCTION INCREASE
BMW tests Neue Klasse EV lines
BYD surpasses 10M NEVs milestone
Ineos to resume Grenadier production
REGULATION
Trump’s semiconductor plans reshape industry
Proposed tariffs threaten auto supply chains
RISK ANALYTICS
“What Every Multinational Company Should Know…”
Bankruptcy
Northvolt AB has filed for bankruptcy protection in the US under Chapter 11 but affirmed that the planned $7B EV battery plant in Quebec, known as Northvolt Six, will not be impacted. The Canadian subsidiary managing the project operates independently from the parent company’s financial restructuring.
Despite active work at the site, questions have arisen about the $2.4B in funding pledged by Quebec and Ottawa, including $240M in secured loans and $270M invested in the parent company.
Northvolt has faced financial challenges, including layoffs and asset sales in Sweden, but emphasized its commitment to completing the Quebec project.
Meta System, an Italy-based electronics supplier to BMW, is under financial strain after delays in a $187M equity investment from Jianeng Meida Taizhou Holdings, a Chinese investor.
The first tranche of the funding, initially expected by August 15, remains under review by Italy’s Golden Power committee, which oversees deals involving strategic assets.
Meta System has filed for court protection from creditors after recording losses and relying on its largest shareholder, Shenzhen Deren Electronic, for financial support.
Hycan, the former EV joint venture between GAC and Nio, is nearing collapse as it struggles with mounting debts, legal disputes, and plummeting employee numbers.
The company has laid off most of its staff, shutting down its Shanghai operations and leaving only around 50 employees to maintain minimal activities at its Guangzhou headquarters. Layoffs began in April 2023, and production had ceased entirely by mid-year.
Employees have protested over unpaid compensation and unfulfilled stock buybacks, while over 100 lawsuits have been filed against the company by suppliers this year.
Once intended to bridge GAC’s premium ambitions and Nio’s mass-market goals, the venture has failed to sustain operations, with Nio completely withdrawing its stake in 2022.
Hycan’s downfall highlights the risks of joint ventures in the competitive EV market, where misaligned goals and financial instability can disrupt supply chains and create reputational risks for stakeholders.
Disaster
Three workers, including two Hyundai researchers and one subcontractor, died at Hyundai’s Ulsan plant in South Korea during a vehicle performance test.
Preliminary reports suggest toxic gas from unventilated exhaust fumes in an enclosed test chamber may have caused the accident. The victims were found unconscious and later pronounced dead at nearby hospitals.
Hyundai, which operates the world’s largest single automobile plant in Ulsan, is investigating the cause alongside local authorities. This is the second fatal incident at the plant in two years, following a worker’s death in 2023.
Human Capital
Ford plans to cut 4k jobs in Europe by the end of 2027 due to slowing demand for EVs and increased competition from Chinese automakers.
The job reductions will mainly impact plants in Germany and Britain, including a scaling back of production at the Cologne plant for the electric Explorer SUV.
This strategy adjustment comes as EV sales in the EU have declined by 5.8% in the first nine months of 2024.
About 1k US employees, or around 6% of Nissan’s workforce in the country, have accepted early retirement packages as part of the company’s plan to cut 9k jobs globally following a significant profit outlook reduction due to a sales decline in China and North America.
Bosch announced plans to reduce working hours for 450 employees in Germany starting March 1, 2025, citing challenging economic conditions. The affected employees, currently working 38-40 hours weekly, will shift to 35-hour contracts, impacting locations primarily in Stuttgart and Gerlingen.
Bosch previously announced 7k job cuts in Germany and as the European automotive sector faces declining demand and increasing competition from Chinese automakers. Bosch Chairman Stefan Hartung has not ruled out further workforce reductions.
Volkswagen’s workers, represented by the IG Metall union, have proposed $1.6B in cost-saving measures to avoid closing German factories.
This includes forgoing bonuses for 2025 and 2026 amid intense negotiations over proposed cuts, such as a 10% pay reduction, to tackle high costs and decreasing demand in Europe and China.
The union has threatened unprecedented strikes if closures progress, while management has not ruled out factory shutdowns.
The proposal also urges contributions from stakeholders, including the controlling Porsche and Piech families.
Mergers, Ventures, Acquisitions
ExxonMobil and LG Chem have signed a memorandum of understanding to supply up to 100k metric tons of lithium carbonate from ExxonMobil’s planned lithium extraction project in Arkansas to LG Chem’s upcoming cathode plant in Tennessee.
LG Chem’s Tennessee facility, set to be the largest cathode plant in the US, will produce 60k tons of material annually to support EV battery production.
Opening
German automotive supplier Mubea CCS has inaugurated a $54.9M plant in Ramos Arizpe, Coahuila, Mexico, to manufacture fiberglass and resin composite springs for automotive chassis.
Production Decrease
Stellantis has postponed the production of its Ram electric pickup trucks to the first half of 2025, citing a need to ensure quality amid high workloads. The delay reflects the ongoing turbulence in the EV transition, as automakers face slower-than-expected demand and strategic debates over flexible platforms.
Stellantis is developing the STLA Frame platform, designed for large trucks and SUVs, which supports gasoline, hybrid, and fully electric models. The delay signals automakers’ challenges in balancing EV innovation with market readiness, underscoring the risks of production delays and evolving consumer demand.
Production Increase
BMW has produced its first test units of the Neue Klasse EV at its new plant in Debrecen, Hungary, marking a significant milestone in its preparations for series production set to begin in late 2025.
BYD has become the first automaker to produce 10M NEVs, a milestone three years after reaching its one-millionth NEV.
In October 2024, BYD surpassed 500k monthly sales for the first time, contributing to over 3.25M NEVs sold year-to-date—a 36% increase from the previous year. Nearly 1.36M of these were fully electric. BYD ramped production by 200k units to meet demand and recently hired 200k new employees.
The company is also accelerating global expansion with new facilities in Thailand, Hungary, Brazil, Pakistan, Turkey, and Mexico, aiming to close the gap with global automakers like Ford, which BYD outsold in Q3 2024.
Ineos Automotive announced that production of its Grenadier SUV and Grenadier Quartermaster pickup will resume in January at its Hambach, France facility, following a suspension due to a component shortage linked to Recaro Automotive’s insolvency.
The halt, which began in September, delayed the launch of the Quartermaster in the Americas to early 2025. The production delay highlights the vulnerability of automotive supply chains to supplier financial health, impacting launch timelines and market strategies.
Regulation
President-elect Donald Trump’s criticism of the 2022 CHIPS Act signals potential shifts $ in US semiconductor policy. Any changes to semiconductor policy could impact the automotive industry’s access to critical chips, influencing production timelines and global competitiveness.
Trump has suggested imposing high tariffs on chip imports to incentivize domestic manufacturing, contrasting with the CHIPS Act’s direct subsidies that have supported investments like TSMC’s $6.6B grant for its Arizona plants.
The auto industry remains vulnerable, with geopolitical tensions between Taiwan and China threatening supply chains for critical automotive semiconductors. Taiwan, which provides 44% of global logic chips, poses a significant supply risk; disruptions could lead to increased costs and insufficient US capacity to replace imports in the near term.
Meanwhile, Trump’s proposed tariffs—potentially as high as 200%—on automotive imports from Mexico, China, and other regions could lead to significant cost increases $ for automakers, suppliers, and consumers while forcing a major reorganization of global supply chains.
These tariffs are likely to accelerate nearshoring trends and localization efforts that began during the pandemic, but they also risk escalating vehicle and part prices, squeezing already tight profit margins.
Trump’s trade policies aim to incentivize American manufacturing but may provoke retaliatory actions, especially from China, which dominates the supply of critical EV battery materials. Retaliatory measures could disrupt EV production in the US, raising costs and limiting profitability.
Key trade concerns include the 2026 review of the USMCA, which may resemble a renegotiation under Trump’s leadership. With Mexican assembly plants supplying a substantial share of North American vehicles—30% for GM, 24% for Stellantis, and 15% for Ford—tariffs could destabilize operations, particularly for the Detroit 3’s profit-heavy pickup trucks. Even minor changes to USMCA compliance rules or new parts tariffs could cascade into higher prices for both consumers and suppliers.
Despite the challenges, some industry leaders remain cautiously optimistic, citing lessons learned during Trump’s first term. Automakers like Toyota have strengthened supply chain resilience, while suppliers like Martinrea see opportunities to benefit from reshored production.
However, most are revisiting sourcing strategies to minimize cross-border part movement and reduce tariff burdens, anticipating four turbulent years of US trade policy. “With the potential of tariffs being applied as they cross the border multiple times, costs and profits will be affected,” said Sam Fiorani of AutoForecast Solutions.
Risk Analytics
The risk analytics article is incredibly important, and nicely written. I recognise the article is most likely written for the US market, but makes perfect sense to review it also from an EU & UK perspective too, especially as each of their regulatory reporting requirements ramp up. Whether you import or export, supply chain risk management could easily catch you out.