Elm Analytics - Automotive Supply Chain Risk Digest #143 - November 1 - 7, 2019

CHANGE IN MANAGEMENT

Daimler AG is now operating with a new corporate structure. As part of a restructuring effort, it is now the parent company to Mercedes-Benz Cars & Van, Daimler Truck AG, and Daimler Mobility AG. Each of which is an independent stock corporation.

EARNING DIP

New car sales in the UK fell by nearly 7% in October due to the "economic and political uncertainty" brought by the forthcoming election and Brexit.

INDUSTRY DIRECTIONS

Automotive vendors are predicted to spend $2B less on tooling in 2020 in North America. The driving factor for this change is fewer vehicles sourced for production. Automakers will be investing heavily in new technology and scrutinizing their budgets.

A new survey from SAE International found that 73% of consumers would prefer to share control with self-driving vehicles. 92% of respondents said it is a requirement to be able to activate an emergency stop function.

Automotive News: "Trade tensions throw Chinese automakers, suppliers off track, but they're not retreating"

JD Power reports that electric vehicles outsold cars with manual transmissions in the most recent quarter of this year. Only 1.1% of vehicles sold in the US were equipped with manual transmissions, down from 1.6% a year prior.

LABOR DISPUTE

GM believes the 40-day strike cost the company $3B. However, executives state the 4-year contract will position the company to better transition to production of electric vehicles.

LITIGATION

As the federal probe into UAW corruption continues, current UAW president Gary Jones has announced he is taking a leave of absence "...so that the union can continue its fight to improve the lives of the UAW's members and families". Union VP Rory Gamble will serve as acting president.

Former UAW VP Joe Ashton, who once sat on the GM board, has been charged in the ongoing federal corruption probe into the union. Ashton is being charged with wire fraud and money laundering.

MERGERS, VENTURES, ACQUISITIONS

In its proposed next contract with the UAW, Ford would agree to invest $1B into its facility in Louisville, Kentucky. The deal includes a commitment from the automaker to create 8,500 jobs as well as invest $6B in products across its operations.

Yanfeng Automotive Interiors is selling its Grand Rapids injection molding facility to Detroit-based Green Light Growth Partners. The business will be renamed Kendrick Plastics Inc, and the 400 existing employees will continue to produce interior trim components and assemblies.

Roadrunner Transportation Systems is selling its Intermodal Services business to Universal Logistics Holdings for $51M. Lower volume, the GM strike, and a malware attack led to the sale.

Bolivia's government has canceled a joint project with Germany's ACI Systems Alemania to build an EV battery factory and a lithium hydroxide plant. Residents near the proposed sites have been protesting since early October against the project.

Cooper Tire is taking full ownership of its JV in Mexico by purchasing its Mexican partner's 42% stake in Corporacion de Occidente SA de CV. The transaction is expected to close in early 2020.

PSA Group and Changan Automobile are ending their struggling joint venture in China. Changan is reportedly looking to sell its half of the investment.

PLANT CLOSING

Arlanxeo will close its Keltan EPDM (Ethylene Propylene Diene Monomer) plant in Orange, Texas. However, the location will continue to make butadiene rubber and hydrogenated nitrile butadiene rubber. EPDM is used in automotive sealing systems, hoses, v-belts, and anti-vibration parts. Although the Orange facility is Arlanxeo's sole production site in the US, they continue to produce EPDM in Saudi Arabia, China, and the Netherlands.

Ford is planning to close its engine plant in Romeo, Michigan. The closure will displace 600 workers who will either be offered jobs at other plants or bought out.

PRODUCTION INCREASE

After reducing all of their plants to single shifts in August, Maruti Suzuki has resumed second shift production at its plant in Gurugram, India. An increase in sales last month prompted the restart of the shift and the hiring of 500 temporary workers.

REGULATION

After holding "good conversations" with automakers in the EU, Japan, and elsewhere, US Commerce Secretary Wilbur Ross says that the US may not need to impose tariffs on imported automobiles.

Germany is increasing cash incentives for electric vehicles. The "Environment Bonus" is expected to affect nearly 700k cars through 2025. The government is attempting to speed up the transition away from internal combustion engines.