Automotive Supply Chain Risk Digest #411
December 12 - 19, 2024, by Elm Analytics
Contents
CLOSING
Volkswagen negotiates to avoid factory closures
EXPANDING
Gotion builds factories in Morocco, Slovakia
HUMAN CAPITAL
Brose cutting 700 German jobs
Defense contractors hire auto industry workers
INDUSTRY DIRECTIONS
GM, Stellantis leave minority supplier council
How GM fell to #16th in China sales
Mexican automotive regulations shift dramatically
AI, automation transform transportation industry
LABOR DISPUTE
Tesla union tensions escalate at Giga Berlin
MERGERS, VENTURES, ACQUISITIONS
Honda and Nissan discuss potential merger
Foxconn explores Nissan acquisition for EVs
Witte expands Czech, Bulgarian facilities
Gentex to fully acquire Voxx International
CATL supports suppliers to foster battery innovation
OPENING
Yokohama starts construction on China tire factory
PRODUCTION INCREASE
Stellantis invests $2.1B in Italian factories
Audi FAW begins production in Changchun, China
REGULATION
US escalates labor dispute under USMCA
RISK ANALYTICS
S&P reviews 2024 industry developments
PWC’s 2025 Automotive US Deals Outlook
Closing
Volkswagen is reportedly negotiating with workers to keep its German factories open. If workers forfeit bonus payments, Volkswagen could potentially reinstate job security agreements until 2030.
The move follows massive strikes at nine plants, including its EV-only Zwickau factory, sparked by plans to close three factories, lay off thousands of employees, and cut the wages of the remaining workers by 10%.
While the proposed agreement would prevent further walkouts, cost-cutting measures like shifting Golf production to Mexico and scaling back EV production in Zwickau remain insufficient to address Volkswagen’s financial challenges, which include a $18.5B savings goal and competitive pressures in China.
Expanding
Chinese battery cell manufacturer Gotion High-Tech is investing about $2.67 billion to build two 20 GWh battery cell factories in Morocco and Slovakia.
The Moroccan plant, costing around $1.38 billion, will be located near Rabat, while the Slovakian factory, a joint venture with InoBat, will require about $1.35 billion and begin operations in 2026 in Šurany.
Both plants will focus on LFP and LMFP battery cells. Morocco plans to expand its capacity to 100 GWh, and Slovakia plans to expand it to 60 GWh.
Volkswagen, which owns 25.6% of Gotion, can benefit from this expansion as the company extends its reach beyond China.
Human Capital
Brose plans to cut 700 jobs in Germany due to low capacity utilization and decreased sales, with significant reductions expected at its headquarters in Coburg and Bamberg. The company is facing a projected loss of around $57M for 2024.
Meanwhile, German defense contractors, such as Hensoldt and Rheinmetall, are hiring displaced automotive workers as the automotive industry reduces its workforce due to stagnant demand for EVs and increasing competition from China.
Hensoldt plans to onboard entire teams from auto suppliers $, expanding its workforce as defense spending rises across Europe in response to ongoing conflicts. Germany’s auto industry is projected to lose 12% of its jobs by 2030.
The transition of skilled workers from the automotive sector to defense could lead to talent shortages, disrupt supply chains, and hinder innovation.
Industry Directions
General Motors and Stellantis have chosen to withdraw $ from the Michigan Minority Supplier Development Council (MMSDC) board and end their sponsorship.
This decision comes amid a legal dispute with Piston Group. The dispute began when MMSDC removed Piston’s Minority Business Enterprise certification in 2021, a decision that a court recently overturned.
In response to this situation, Stellantis is shifting its support to the National Minority Supplier Development Council. Both GM and Stellantis continue to emphasize their commitment to supplier diversity. This situation raises concerns about how these changes might impact minority suppliers’ certifications and business opportunities.
NYTimes In-Depth Retrospective:
Foley 2024→2025 Trends:
Labor
Tensions between Tesla and Germany’s IG Metall union have escalated at Tesla’s Gigafactory Berlin. The automaker accuses the union of attempting a “coup” by filing a court motion to remove Michaela Schmitz, the pro-management head of the plant’s workers’ council.
Tesla, which operates the only German auto plant without a collective bargaining agreement, denies IG Metall’s claims of anti-union tactics and poor working conditions.
The dispute follows IG Metall’s growing influence at the plant. The company secured 16 seats on the workers’ council and threatened strikes to push for unionization.
Tesla has framed the union’s actions as disruptive, while IG Metall accuses Tesla of violating labor laws.
Mergers, Ventures, Acquisitions
Honda and Nissan, the second and third most prominent car makers in Japan, are discussing a possible merger that could make them the third-biggest automaker group in the world.
By joining forces, they hope to combine their strengths in hybrid and electric vehicle technology. Both companies are facing tough competition from Chinese automakers and dealing with the high costs of transitioning to electric cars.
They aim to share resources, enhance global supply chains, and strengthen their competitiveness in important markets. These discussions highlight a broader trend in the auto industry, where many car makers are forming partnerships to tackle technological challenges and economic pressures.
A memorandum of understanding is expected to be announced soon, but no final decisions have been made yet.
If Honda and Nissan merge, it could significantly change Japan’s automotive industry and help the country better compete in the fast-evolving global EV market, which cost-competitive Chinese manufacturers currently lead.
Not to be left out, Foxconn is also exploring the possibility of acquiring Nissan $ to expand its EV business, leveraging Nissan’s expertise in manufacturing and design.
Jun Seki, a former Nissan executive now leading Foxconn’s EV division, has been instrumental in establishing connections between the two companies.
This interest aligns with Nissan and Honda’s discussions about a potential merger or collaboration, as Foxconn seeks to enhance its automotive design and production capabilities through partnerships and acquisitions.
Witte Automotive announced expansions at its production facilities in Ostrov, Czech Republic, and Ruse, Bulgaria. The Ostrov site will double in size to over 538k sq ft, accommodating new projects, while the Ruse plant has expanded by 50%, allowing for integrated production processes. In 2024, Witte acquired full ownership of its Bulgarian operations and increased its global presence through a takeover of the Vast Automotive Group.
Based in Zeeland, Michigan, Gentex Corporation plans to acquire the remaining stock of Voxx International, a Florida-based manufacturer known for in-vehicle entertainment and security systems. Gentex previously held about 30% ownership of Voxx, which also produces under brands like Pioneer, Klipsch, and Onkyo. This acquisition aims to enhance Gentex’s consumer product offerings and its automotive components.
CATL, the largest battery maker, will support its suppliers financially to boost innovation in battery materials and equipment amid the EV price war in China. The company has offered to share R&D costs, make advance payments, and assist with certification to promote new technologies.
Chairman Robin Zeng emphasized the need for equitable profit distribution in the supply chain to ensure long-term viability. This initiative aims to alleviate financial pressure on suppliers and foster the development of innovative battery technologies crucial for EV market growth.
Opening
Yokohama Rubber has begun construction on a $483M tire factory in Hangzhou, China, designed to replace an older facility in the area.
Production Increase
Stellantis has announced a $2.1B investment in its Italian manufacturing plants for 2025, focusing on new electric and hybrid models.
Key plans include extending Fiat Panda production at Pomigliano to 2030, introducing hybrid and electric Fiat 500 at Mirafiori in Turin, and expanding the Cassino and Melfi plants for STLA-Large and STLA-Medium platforms.
The company aims to launch new electric SUVs and plug-in hybrids while continuing its commitment to the Automotive Cells Company (ACC) battery joint venture.
However, construction on ACC’s Gigafactories in Italy and Germany is paused due to changes in battery technologies.
Audi FAW New Energy Vehicle officially began production at its manufacturing factory in Changchun, China, on December 17, 2024, with the first model produced being the Audi Q6L e-tron. The factory has an annual output capacity of over 150k vehicles and is expected to create around 3k jobs.
Regulation
The United States has escalated a labor dispute under the USMCA Rapid Response Labor Mechanism, requesting a panel to address alleged violations of workers’ collective bargaining rights at Pirelli Neumáticos’ tire manufacturing facility in Silao de la Victoria, Guanajuato, Mexico.
The dispute arises from allegations that Pirelli bypassed a rubber industry-wide collective bargaining agreement by implementing one with less favorable terms.
Despite Mexico’s review finding no violations, the US Trade Representative, Katherine Tai, maintains that rights are being denied and is advancing the dispute process to enforce compliance with Mexican labor laws and USMCA provisions.
Risk Analytics
S&P Global Mobility:
PWC:
