Focus: Europe's carmakers scramble to replace Ukrainian auto parts

Fujikura

11/03/2022 14:55

By Christina Amann and Nick Carey
    BERLIN, March 11 (Reuters) - Carmakers including Volkswagen
 VOWG_p.DE  and BMW  BMWG.DE  are scrambling to find alternative
sources of vital parts made in Ukraine from as far afield as
China and Mexico, as Russia's invasion halts assembly lines and
breaks complex supply chains.
    The hunt for new supplies is the latest challenge for an
auto industry already reeling from soaring metal and energy
prices, supply chains snarled by the pandemic, and a shortage of
semiconductor chips.  urn:newsml:reuters.com:*:nL2N2VB0JU 
    The fighting in Ukraine has now disrupted output of wire
harnesses, which bundle up to 5 km (3.1 miles) of cables in the
average car. Unique to each model, vehicles cannot be built
without them.   
    As a result, world No. 2 automaker Volkwagen and rival BMW
have cut output and temporarily closed some assembly lines,
while Mercedes-Benz  MBGn.DE  has warned its production will be
affected soon.  urn:newsml:reuters.com:*:nL1N2V51Q8
    VW's premium brand Audi said the entire Volkswagen group is
working to get major suppliers to relocate their Ukrainian wire
harness production to other plants, or find alternative
suppliers. That search includes Eastern Europe, North Africa,
Mexico and "possibly" China, it said.
    "We have been working successfully with various suppliers
from these regions for our models for years," it said. "It is
possible, for example, that suppliers will split production
across several locations."
    BMW also said it is in "intensive talks" with suppliers to
find alternative sources for parts, while world no. 4 carmaker
Stellantis  STLA.MI  said it has already shifted its sourcing
from Ukraine to elsewhere in Europe, declining to say where.
    Nick Klein, a vice president at global logistics firm OEC
Group, said carmakers who have relied on Ukraine will need to
move fast.
    "You'll need to order way ahead of time, because you'll face
delays, and carmakers will be competing against each other for
the same sources," said Klein, who specialises in automotive
logistics.
    
    'MESSED-UP' SUPPLY CHAINS
    Western Ukraine, with its low-cost, highly-skilled workforce
and proximity to Europe's car factories and a wealth of raw
materials, has grown into a major production hub for wire
harnesses, with Japan's Fujikura  5803.T  and France's Nexans
 NEXS.PA  among those producing there. 
    Some manufacturers, like Fujikura, have suspended Ukrainian
production altogether since the invasion, while others are
operating at reduced capacity. Neither Fujikura nor Nexans
replied to requests for comment on their plans.
    Moving production to plants in other low-cost markets with a
vibrant wire harness industry, like Romania, Serbia or Tunisia,
involves buying new equipment to boost capacity, which could
take months to install. 
    According to industry sources, suppliers and carmakers are
discussing who will foot the bill. Carmakers interviewed for
this story would not name their suppliers.
    Some wire harness manufacturers in Ukraine, such as Kromberg
& Schubert, Japan's Yazaki and Leoni  LEOGn.DE , already have
alternative plants in other countries. Leoni declined to comment
on its plans, and K&S and Yazaki did not respond to requests for
comment.
    There is still a trickle of supply out of Ukraine. One wire
harness manufacturer in the country's west, who spoke on
condition of anonymity because of concerns for the safety of
workers, said some production continues during the day, though
it is shuttered at night due to curfews.
    Some trucking companies are hauling wire harnesses south
across the border into Romania because for now the fighting has
not reached that region, OEC Group's Klein said. That could soon
change.
    "The number of truckers who are willing to drive those
routes as this continues will be less and less," Klein said.
"There's going to be a point where you can't get anything out of
there safely." 
    Facing a "messed-up" global supply chain, European carmakers
need as many sources of parts as possible, Klein said.
    "Right now you cannot have enough suppliers and you cannot
have enough shipping partners, because of the climate we're in."

 (Additional reporting by Gilles Guillaume in Paris and Pushkala
Aripaka, Shanima A and Yadarisa Shabong in Bengaluru; Editing by
Josephine Mason and Jan Harvey)
 ((nick.carey@thomsonreuters.com; +44 7385 414 954;))