Elm Analytics - Automotive Supply Chain Risk Digest #145 - November 15 - 21, 2019
Detroit's Sakthi USA will likely liquidate its assets and shutter operations. Disputes between Sakthi's owners and management led to lawsuits and the loss of business from its primary customer, GM. The Detroit plant that produced knuckle and steering arms lost nearly $1M per week during May - July 2019 and is now in receivership.
Dura Automotive secured $84M in debtor-in-possession financing through US Bankruptcy Court this week. Financier and CEO of Dura, Lynn Tilton, placed the profitable company into Chapter 11. Reportedly, a high-stakes legal gamble to free the company from obligations backfired. Tilton's previously approved $77M financing commitment was replaced by $84M of financing from Bardin Hill.
CHANGE IN MANAGEMENT
UAW President Gary Jones resigned from office this week amid an ongoing federal probe into the union. The UAW's executive board will meet to name a new president but have yet to set a date.
Volkswagen has named former BMW executive Markus Duesmann as the new CEO of Audi.
Daimler is planning to cut up to 1.1k jobs as part of a new sustainable business strategy. The automaker's goal is to reduce personnel costs by $1.1B.
Germany's cartel authority has fined BMW, Volkswagen, and Daimler a total of $110.7M for engaging in price-fixing steel purchases. The cartel office said the automakers regularly met with steelmakers from 2004-2013 to discuss uniform surcharges when purchasing steel.
GM filed a lawsuit in federal court this week, alleging that FCA's late CEO Sergio Marchionne orchestrated a multimillion-dollar racketeering conspiracy that corrupted three rounds of bargaining with the UAW and hurt GM. GM's general counsel Craig Glidden said, "We were denied benefits that FCA received." and also that the benefits FCA received were "...procured through fraud and bribery."
A New York court ruled this week that GM does not have to pay punitive damages for vehicle defects linked to more than 100 deaths. The ruling stated that GM could not be liable for actions taken by its pre-bankruptcy corporate predecessor "old GM."
GM is recalling 640K pickup trucks worldwide due to a defect that can cause hot gas to leak from a seatbelt tensioner system and ignite the vehicle's carpet. The recall covers some 2019-2020 Chevy Silverados and GMC Sierra 1500s.
FCA is recalling 700K SUVs worldwide due to an issue that can cause the engines to stall. The recall covers certain 2011-2013 Jeep Grand Cherokees and Dodge Durangos.
MERGERS, VENTURES, ACQUISITIONS
ZF Friedrichshafen and Chinese supplier Wolong Electric Group Co. have signed a JV agreement in which Wolong will build electric motors and related components for ZF's driveline systems. The partnership will be incorporated in Shangyu, China, and is expected to employ up to 2K people by 2025.
German auto supplier Continental has announced a new global restructuring program called "Transformation 2019-2029." The effort will close several locations and eliminate 5K jobs. The Newport News, Virginia, and Limbach-Oberfrohna, Germany, are slated to close. Its plant in Pisa, Italy, will phase out the production of gasoline engine injectors.
Despite previously announcing that they would close their Detroit-Hamtramck assembly plant, GM will keep the plant open and invest $3B to build electric vehicles there. While analysts have speculated on what models will be built there, GM has yet to make an announcement.
Ford has announced a $60M investment in its Woodlawn stamping plant in Buffalo, New York. While the investment is a vote of confidence in the plant, the use of the investment hasn't been specified.
Mitsubishi Motors North America has signed a long-term lease to locate its new North American headquarters in Franklin, Tennessee. As part of the move, the automaker will hire 150 people, with more than 50 already hired.
Japan's aluminum auto parts maker Nippon Light Metal Georgia broke ground on a new $50M plant in Adairsville, Georgia, this week. The plant is being built on a 162-acre site and will create 110 jobs for the area.
According to trade law experts, President Trump can no longer impose Section 232 tariffs on European or Japanese car imports since he took no action by the Nov 14 deadline. The 1962 act provides clear time limits that a president has for invoking tariffs under Section 232 for national security reasons.
The state of California announced this week that it would halt all purchases of new vehicles for state government fleets from automakers backing President Trump's campaign to strip the state of its authority to regulate emissions. GM, Toyota, and FCA have all voiced support for President Trump's plan.
Managing supply chain risk in an economic downturn:
"The best supply chain leaders will typically lean on their own talent as those in the trenches will often see signals of distress or a turnaround before analysts."