Elm Analytics - Automotive Supply Chain Risk Digest #71 - June 15 - 21, 2018

CHANGE IN MANAGEMENT

Audi has tapped top sales exec Abraham Schot to take over as CEO after CEO Rupert Stadler was arrested this week in relation to the emissions cheating scandal. Audi has agreed to suspend Stadler "until the circumstances...have been clarified.".

HUMAN CAPITAL

Tesla is cutting 420 employees from its Fremont, CA assembly plant and 86 employees from its Palo Alto, CA headquarters. CEO Elon Musk said the cuts will mostly affect salaried workers and wouldn't hinder the automakers' ability to meet production goal for the Model 3.

INDUSTRY DIRECTIONS

GM is stepping up its use of 3D printers at its plants, which has the potential to save millions of dollars in annual production costs. One example is a tool that would cost $3,000 to buy from a third party but only costs $3 to 3D print on site.

Toyota, one of the most profitable automakers, is shifting money from marketing to R&D. The move is expected to optimize its sales organization. It wants to bring innovation in line with other tech-based competitors.

LITIGATION

Tesla is suing former a former employee for hacking into confidential company and trade secret information and sharing it with outside entities. They say that the employee also took and shared illicit photos of the production line.

MERGERS, VENTURES, ACQUISITIONS

Magna is setting up two new joint ventures with Chinese automaker Beijing Electric Vehicle Co. to build electric cars in China. The ventures will take over an existing plant in Zhenjiang, China and will produce up to 180,000 vehicles per year starting in 2020.

Audi and Hyundai are teaming up to develop hydrogen fuel-cell vehicles. The deal will give each automaker access to the other's existing and future fuel-cell patents and will also apply to the Kia and Volkswagen brands.

Porsche has purchased a 10% stake in Croatian electric supercar startup Rimac Automobili. Their latest offering, the Concept Two, is said to reach a top speed of 256mph, have a range of 404 miles, and recharge 80% of its battery in 30 minutes.

Toyota has invested $1b into Singapore-based ride-hailing firm Grab in an effort to expand its collection of driving pattern data as it looks to push into the mobility-as-a-service industry. In return, Grab will be able to expand services such as food delivery and digital payments using the investment capital.

NATURAL DISASTER

A 6.1 magnitude earthquake in Osaka, Japan earlier this week has left 3 dead and hundreds injured. Several manufacturers including Daihatsu Motor Co. and Panasonic were forced to suspend some nearby operations.

PLANT CLOSING

ZF-TRW is closing its parts plant in Tillsonburg, Ontario, Canada by the end of the year, leaving 71 people out of work. The supplier is moving the work to a facility in Mexico.

PLANT OPENING

Volvo CEO Hakan Samuelsson is voicing support for no tariffs on vehicles between the US, Europe, and China as the automaker gears up to open their new $1.1B plant in Ridgeville, South Carolina. The automaker is planning to have 1,500 workers at the 2.3m sf plant by the end of the year.

Japanese supplier MiebeaMitsumi has opened a new auto parts plant in Kosice, Slovakia. The plant will make products such as car antennas and LED backlights and also function as the company's second R&D base.

Foxconn has purchased a seven-story building in downtown Milwaukee, Wisconsin that will serve as its North American headquarters. The Taiwan-based electronics company said the new HQ will employ more than 500 people.

Ford has announced that it is turning the old Michigan Central Station, which it recently acquired, into an 'innovation hub' where they will work on autonomous and electric vehicles. Renovations to the 13 story, 500,000sf former train station are expected to be completed within four years.

Hyundai and Kia are setting up new regional headquarters locations in Europe and America in order to move decision-making closer to their respective markets. The changes will take effect on July 2, and are the first steps in a global reorganization plan for the brands.

REGULATION

China says that they will retaliate "forcefully" if President Trump follows through with tariffs on another $200b in Chinese imports. Trump also threatened tariffs on another $200b if Beijing retaliates.

German automakers are voicing support for dropping all tariffs on both sides if President Trump backs off the threat of imposing a 25% tax on auto imports from Europe.

Colorado Governor John Hickenlooper has signed an executive order directing the state's Air Quality Control Commission to draft rules adopting the same vehicle emissions standards as California by year's end. If completed, Colorado would be the 13th state to adopt California's standards.

RISK ANALYTICS

A new report from JLT Specialty finds that the automotive industry was the "most disrupted sector in 2017". Compared to 2016, supply chain disruptions were up 30%.

A 25% US tariff on imported vehicles and components could lead to rising auto prices, falling sales and lost jobs. CAR's Kristen Dziczek: "It seems like it is going to be so devastating that I can't imagine that they're actually going to do it" 

The auto industry should be optimistic, but cautious with huge investments in AV / EV. AlixPartners' Global Automotive Outlook covers the effects of low consumer buy in, robotaxis and the changing relationships between automakers, suppliers and the tech industry.