Elm Analytics - Automotive Supply Chain Risk Digest #28 - August 18 - 25, 2017

​CHANGE IN MANAGEMENT

Johnson Controls' controversial CEO, Alex Molinaroli, is leaving ahead of schedule so COO George Oliver can take his place. Oliver was Tyco International's chair when it bought Johnson Controls a year ago.

Hours after announcing his resignation from Key Safety Systems, as CEO, for family reasons, Ford appointed Jason Luo to run its operations in China. Luo was a key player, bridging cultural gaps, in the coming acquisition of Takata by Key Safety Systems. He takes the position from Peter Fleet, who is also group vice president and president of Ford Asia Pacific. Jeff Wang will now serve as executive chairman of Key Safety Systems. Board director Yuxin Tang will assume the role of interim president.

HUMAN CAPITAL

China’s unwritten boycott of South Korean goods is affecting its own workers. Kia's Yancheng, China facility is now operating at 30% capacity due to a 61% drop in sales in China. This has resulted in shift cuts and reduced pay for thousands of workers in Yancheng. Increasing global supply chains have far reaching repercussions making political pressure less black and white.

INDUSTRY DIRECTIONS

As ride sharing becomes more prevalent, auto suppliers are facing new challenges in designing single vehicles that will be used by thousands rather than just individuals and families.

Recent announcements of partnership with Toyota and NTT DoCoMo... Intentions to build 100 self-driving vehicles for testing... Intel is making a hard play for autonomous vehicle technology. It expects a big return, estimating a market of $7 trillion by 2050.

It is worth checking out The Atlantic's "Inside Waymo's Secret World for Training Self-Driving Cars".

Upcoming elections looming, German politicians are critical of auto makers for the handling of the diesel emission scandal.

LITIGATION

Japanese bearings supplier, Nachi-Fujikoshi, reached a $3.2M agreement in Michigan federal court. This settles claims that it participated in a price-fixing scheme with manufacturers in the U.S., Japan and Germany.

MERGERS, VENTURES, ACQUISITIONS

China's Great Wall Motor Co. is interested in buying the Jeep brand from FCA. 

FCA CEO Sergio Marchionne may be setting his sights on a merger with South Korean automaker Hyundai.

Automotive seating supplier Adient has acquired Oak Park, MI based seating supplier Futuris Group for $360M. Adient CEO Bruce McDonald says the deal "strengthens our position with West Coast customers, improves our utilization rates in NA and expands our business in SE Asia."

NSK plans to close a series of acquisitions over the next two years that will help them bridge the gap in talent and expertise for electric power steering systems in larger vehicles. They currently specialize in technologies for smaller vehicles.

Ford Motor Company has signed a memorandum of understanding with China’s Anhui Zotye Automobile to explore a joint venture to manufacture a new brand of all-electric vehicles China.

PLANT CLOSING

English supplier Lawrence Automotive Interiors, based in Coventry will close by November 10. The 500-person facility provided wood veneer trim to Jaguar Land Rover. A trade union officer stated, "Over a period of time the Chinese parent company has failed to invest in the technology which led to quality and cost delivery problems. "

PLANT EXPANSION

Canadian Kuntz Electroplating, an electroplating auto parts supplier based in Kitchen, Ontario, will expand it facility. The supplier to Ford, GM and Harley Davidson expects to modernize equipment, adding new lines and an automated material handling system.

PLANT OPENING

Lear will build a new 100,000sf plant in Flint, Michigan. The plant will build seats for GM pickups and employ over 400.

German supplier Bo Parts GmbH is investing $4.1M into a new 60,000sf plant in Greer, South Carolina.

LG Electronics will open a 250,000sf facility next year in Hazel Park, MI for building EV components.

PRODUCTION DECREASE

July's automotive production has declined again, to levels not seen since 2009.

RAW MATERIALS

A new extrusion process should make it more feasible for the auto industry to use magnesium alloys in structural components. The method could reduce cost by eliminating the need for rare-earth elements and improve the materials structural properties.

REGULATION

Even with NAFTA renegotiations currently underway, it seems that President Trump doesn't "think we can make a deal" and says that the US may end up terminating the trade agreement "at some point".

SUPPLY CHAIN

Kansas City Southern has opened a new cargo processing facility in Laredo, Texas. The project will speed secured rail shipments from Mexico into the US by allowing Mexican and US Customs to inspect cargo simultaneously.

A rough rollout of changes to "streamline operations" has caused lots of problems for CSX's freight rail network and the manufacturers that depend on it. Delays and congestion have affected supply chains across the entire eastern half of the US.