Automotive Supply Chain Risk Digest #408
November 22 - 28, 2024, by Elm Analytics
Contents
BANKRUPTCY
Nissan faces urgent investor search, cuts
Webasto restructures $1B debt amid challenges
CHANGE IN MANAGEMENT
Dana CEO steps down, interim appointed
CLOSING
Valeo closes French sites, cuts 1k jobs
Schaeffler shutters UK, Austria plants
DISASTER
Fire damages Vietnam rubber parts factory
EXPANDING
Quebec gets $232M EV supply upgrades
HUMAN CAPITAL
Bosch to cut 5.5k jobs globally
INDUSTRY DIRECTIONS
BYD pushes suppliers for cost reductions
Suppliers shift focus to profitability
LITIGATION
Rivian, Ford in legal supplier disputes
MERGERS, VENTURES, ACQUISITIONS
Volkswagen exits Xinjiang, shifts operations
Novonix inks synthetic graphite deal
OPENING
Great Wall Motors launching Brazil NEV factory
PRODUCTION INCREASE
Chery-Ebro starts production in Spain
REGULATION
China counters tariffs with supply chain tactics
Trump’s sweeping tariffs risk supply chains
SHUTDOWN
Stellantis halts Fiat 500E production again
Bankruptcy
Nissan faces critical financial challenges, with executives reportedly warning the company that it has “12-14 months to survive” without securing a long-term investor.
The automaker plans to cut 9k jobs globally, reduce production by 20%, and sell up to 10% of its Mitsubishi Motors stake to raise approximately $465M.
Germany’s Webasto, known for its roof and heating systems, is negotiating restructuring $ over $1.04B in debt amid deepening industry challenges. The company is selecting a chief restructuring officer and has enlisted Rothschild & Co. as an advisor on debt talks and potential mergers or acquisitions.
These developments follow breaches of loan covenants earlier this year and declining performance, particularly in China, where competition from domestic suppliers has intensified.
Webasto has begun slimming operations, including selling a majority stake in its charging solutions business and filing notice for 218 layoffs at Michigan plants.
Change In Management
Dana’s CEO, James Kamsickas $, is stepping down after nearly a decade, while Bruce McDonald $, the former CEO of Adient, takes on the role of interim CEO and chairman.
The company will sell its off-highway business and implement cost-saving measures of $200M annually by 2026 in response to weakened demand and declining net income. McDonald’s leadership will focus on aligning costs with EV demand, reflecting suppliers’ challenges in adapting to the EV market.
Closing
Valeo plans to close two sites in France, including the La Verriere R&D facility, as part of its restructuring efforts.
This move will include approximately 1k job cuts across Europe, with more than 800 positions affected in France, along with reductions in Germany, Poland, and the Czech Republic. The cuts are driven by a need to adapt to declining automobile production and increased competition from Asian manufacturers.
Schaeffler announced the closure of its bearings production plant in Berndorf, Austria, and clutch manufacturing facility in Sheffield, England, as part of its ongoing restructuring efforts.
Rising material, energy, and labor costs prompted the Berndorf closure while declining global demand led to overcapacity in Sheffield.
Production will shift to more cost-effective facilities in Slovakia and Romania, which will also face job cuts.
Earlier in the year, Schaeffler announced laying off 4.7k employees across Europe, with Germany bearing the brunt, as its operating profit dropped by nearly 50% in Q3.
Schaeffler’s plant closures highlight the mounting pressures on European automotive suppliers to adapt to cost challenges and shifting global demand patterns, exacerbated by competition from lower-cost regions.
Disaster
A fire destroyed the Dong-A Hwasung rubber parts factory in Haiphong, Vietnam, on November 23-24, damaging over 10.7k sq ft of production space and machinery $.
While no casualties were reported, the blaze disrupted operations at the facility, which manufactures rubber components for automotive and industrial applications, including products for LG.
The cause of the fire remains under investigation. Hwasung, part of Korea’s Dong-A Group, has operated its Vietnam subsidiary since 2016 to supply technical rubber goods and other non-tire products.
Expanding
The Canadian federal and Quebec governments have committed approximately $232M to improve port infrastructure $ in Bécancour, Quebec, reinforcing its position as an EV battery hub.
Upgrades include a new wharf and expanded storage facilities. Construction on major EV supply chain projects is underway, with GM and Posco’s $1B Ultium CAM plant two-thirds complete, set for delayed production in late 2025 or early 2026.
EcoPro BM’s $1.2B CAM plant faces challenges but continues development. The region also hosts Nemaska Lithium’s processing plant and potential investments from Vale and Nouveau Monde Graphite, aiming to strengthen Quebec’s industrial and EV supply chain capacity.
Human Capital
Bosch plans to reduce its automotive workforce by up to 5.5k jobs by 2027, citing stagnating global auto sales, overcapacity, and slower-than-expected EV adoption.
The cuts will primarily affect Germany, with significant reductions in advanced driver assistance, automated driving technologies, and centralized software development.
A plant in Hildesheim will see 750 jobs lost by 2032, and Schwaebisch Gmund will lose 1.3k positions by 2030.
Bosch attributes these measures to deferred or canceled projects by automakers and a challenging market environment, including inflation-driven consumer reluctance and competition from cheaper Chinese EV brands.
Industry Directions
BYD has reportedly signaled an escalation in China’s EV price war by asking suppliers to accept a 10% cost reduction starting in January 2025.
BYD clarified that these price cuts are negotiable and part of standard annual bargaining practices. The intensifying price competition has already driven consolidation in China’s auto market, pushing smaller players into bankruptcy while BYD continues to gain market share.
With 3.2M plug-in hybrid and electric vehicles sold in 2024 and record-breaking quarterly revenues, BYD’s strategy positions it to maintain dominance in the world’s largest EV market, potentially further pressuring competitors.
The ripple effects will likely influence global EV pricing, supply chains, and automaker partnerships.
With electric vehicle (EV) production and sales falling below forecasts, major auto suppliers like Magna, BorgWarner, and Lear are shifting their focus from growth to prioritizing cost reductions, profit margins, and shareholder returns $.
After pausing share repurchases to improve its balance sheet, Magna now plans to resume buybacks while concentrating on profitable investments.
BorgWarner has allocated $400 million of its expected $475–$575 million free cash flow in 2024 for share repurchases.
Lear is accelerating its buyback strategy and optimizing its manufacturing footprint through automation and cost-cutting measures.
This collective shift reflects Wall Street’s current emphasis on free cash flow over growth potential.
→ It highlights the critical need to stay informed about industry players’ financial health and priorities.
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Litigation
Increasing in-sourcing by automakers, driven by cost pressures and EV profitability challenges, has led to legal disputes $ with suppliers.
Rivian is in litigation with Bosch over a $204M reimbursement claim following Rivian’s in-sourcing of e-motor production.
Similarly, Ford’s abrupt decision to in-source driveline production for the Mustang Mach-E prompted Tier 2 supplier VCST to sue BorgWarner, claiming $28M in damages for canceled pinion orders.
While in-sourcing is a recurring industry trend, EVs’ reduced parts complexity has heightened tensions as suppliers face fewer opportunities in the value chain.
The shift to in-sourcing highlights a significant risk for suppliers as automakers minimize reliance on external partners, potentially destabilizing supply chain relationships and investments.
Mergers, Ventures, Acquisitions
Volkswagen announced its withdrawal from China’s Xinjiang region, transferring ownership of its Urumqi assembly plant and test tracks to the Shanghai Motor Vehicle Inspection Center.
The automaker had faced criticism from human rights groups for operating in a region linked to forced labor and the repression of Uyghur Muslims.
Volkswagen’s plant, which ceased car production in 2019, became economically unviable as China’s shift to EVs rendered gasoline-powered car facilities obsolete.
Australian battery materials supplier Novonix has signed a 5Y offtake agreement with Volkswagen’s PowerCo to supply at least 32k metric tons of high-performance synthetic graphite starting in 2027.
Novonix’s Riverside facility in Chattanooga, Tennessee, will support production, with commercial operations expected in 2025 and an annual output of 20k metric tons.
Additionally, Novonix is planning a second production facility in the southeastern US, with an initial capacity of 30k metric tons annually, expandable to 75k metric tons.
The deal follows a prior agreement with Panasonic Energy to supply synthetic graphite for North American operations.
Opening
Great Wall Motors (GWM) announced plans to open its NEV factory in Iracemápolis, Brazil, by mid-2025. The plant, its fourth global production base, will initially produce the Haval H6 hybrid SUV with an annual capacity of 50k vehicles, starting with 20k units.
Production Increase
Production has begun at the Chery Ebro joint venture in Barcelona, Spain, repurposing a former Nissan plant that closed in 2021. The facility launched with the assembly of the S700 SUV, a rebadged Chery Tiggo 7 Pro, with plans for 150k vehicles annually by 2029. The plant will produce electric, plug-in hybrid, and ICE models under the Ebro brand, reviving the Spanish marque on its 70th anniversary.
Regulation
US President-elect Donald Trump announced plans to impose sweeping tariffs on imports from Canada, Mexico, and China, citing drug flows and migration as reasons.
A 25% tariff on Canadian and Mexican goods and an additional 10% tariff on Chinese imports are set to take effect on his first day in office.
The move threatens global automotive supply chains and other industries dependent on cross-border trade while risking retaliation from affected countries.
Critics warn of skyrocketing costs, job losses, and potential violations of trade agreements like the USMCA.
Trump’s history suggests tariffs may be leverage for negotiations, but the specificity of these plans raises concerns they will materialize.
NYTimes:
China Has a New Playbook to Counter Trump: ‘Supply Chain Warfare’
Trump’s Tariffs Could Deal a Blow to Mexico’s Car Factories
(from a few weeks ago, but on topic)
Shutdown
Stellantis will halt production of the electric Fiat 500 at its Mirafiori plant in Turin, Italy, from December 2, 2024, to January 5, 2025, due to sluggish BEV sales in Europe and weak demand in luxury markets like China and the US This pause follows multiple production stoppages at the plant earlier this year.
The halt will coincide with the plant’s end-of-year holiday closure, though administrative and research functions will continue. Mirafiori, which employs around 13k people, also produces Maserati sports cars.
Stellantis is implementing temporary halts at other plants in Italy and recently announced the closure of its Luton plant in the UK.
