Wrapup 1: Automakers idle production following Russia's invasion, other firms also scramble

Sumitomo Electric Industries

25/02/2022 17:33

By Ben Klayman
    Feb 25 (Reuters) - Several companies, including automakers
Volkswagen  VOWG_p.DE  and Renault  RENA.PA  and tire maker
Nokian Tyres  TYRES.HE , on Friday outlined plans to shut or
shift manufacturing operations following Russia's invasion of
Ukraine.
    After invading earlier this week, Russian forces pressed
their advance on Friday as missiles pounded Kyiv and authorities
said they were girding for an assault aimed at overthrowing the
government.  urn:newsml:reuters.com:*:nL1N2UZ1Y5  urn:newsml:reuters.com:*:nL1N2V001F
    The United States announced sweeping export restrictions
against Russia on Thursday, hammering its access to global
exports of goods ranging from commercial electronics and
computers to semiconductors and aircraft parts. That could lead
companies to alter manufacturing plans or seek alternative
supply lines.  urn:newsml:reuters.com:*:nL1N2UZ3KE
    The invasion was a factor in consulting firms J.D. Power and
LMC Automotive slashing their 2022 global new-car sales outlook
by 400,000 vehicles to 85.8 million units. The auto industry had
already been dealing with a tight supply of vehicles due to the
global semiconductor shortage.  urn:newsml:reuters.com:*:nL4N2V032A
    "An already-tight supply of vehicles and high prices across
the globe will be under added pressure based on the severity and
duration of the conflict in Ukraine," said Jeff Schuster,
president of global vehicle forecasts at LMC. 
    "Rising oil and aluminum prices will likely affect
consumers’ willingness and ability to purchase vehicles, even if
inventory improves," he added. "We have made significant
downgrades to the Ukraine and Russia forecasts due to the
escalating conflict between the two and the repercussions
associated with sanctions against Russia."
    The conflict could boost oil prices above $100 a barrel,
which would add inflationary pressure on European and American
consumers, Wells Fargo analyst Colin Langan said in a research
note. While consumers have been willing to pay above sticker
price to get new vehicles, sustained higher gas prices could
impact long-term recovery, he said. 
    Germany's Volkswagen said it would halt production for a few
days at two German factories after a delay in getting parts made
in Ukraine.  urn:newsml:reuters.com:*:nL8N2V079W
    France's Renault said it would suspend some operations at
its car assembly plants in Russia next week due to logistics
bottlenecks caused by parts shortages. It did not specify
whether its supply chain had been hit by the conflict, but a
spokeswoman said the action was a consequence of reinforced
borders between Russia and neighboring countries through which
parts are carried by truck.  urn:newsml:reuters.com:*:nL1N2V014D
    The carmaker is among Western companies most exposed to
Russia, where it makes 8% of its core earnings according to
Citibank.
    "Interruptions are primarily caused by tighter border
controls in transit countries and the forced need to change a
number of established logistics routes," the company's Russian
unit said, without naming any countries.   
    Russian carmaker Avtovaz  AVAZI_p.MM , controlled by
Renault, also said it might suspend some assembly lines at a
plant in central Russia for one day, on Monday, due to a
persistent global shortage of electronic components. Avtovaz
also did not mention the invasion in its statement.  urn:newsml:reuters.com:*:nR4N2UT06B
    Finnish tire maker Nokian said it was shifting production of
some key product lines from Russia to Finland and the United
States to prepare for possible further sanctions following the
invasion.  urn:newsml:reuters.com:*:nL1N2V00MI
    
    MANAGING DISRUPTION
    Aptiv Chief Executive Kevin Clark said on Thursday that over
the last couple of months the American auto parts maker had
swapped high-volume parts work out of Ukraine in favor of
lower-volume products "so we were better-positioned to manage
disruption."  urn:newsml:reuters.com:*:nL1N2V016X
    Japanese auto supplier Sumitomo Electric Industries
 5802.T , which employs some 6,000 people in Ukraine to make
wire harnesses, said it suspended operations at its factories
there and was talking to clients about potentially substituting
supplies from other places.  urn:newsml:reuters.com:*:nL1N2UZ1Y5
    Ford Motor Co  F.N  has a 50% joint venture in Ford Sollers,
which has three assembly plants in Russia according to the Ford
website. Ford said in a statement it was "deeply concerned"
about the situation and would "manage any effects" on its
business in real time. 
    The U.S. automaker also said it would follow any laws on
trade sanctions, but declined to discuss whether the Sollers
plants have been affected. 
    While French car parts maker Valeo  VLOF.PA  said the direct
impact on the company is minimal, the invasion could drag down
industry production volumes, and hike energy or raw material
prices.  urn:newsml:reuters.com:*:nS8N2UE03E  urn:newsml:reuters.com:*:nL8N2V01VN 
    Japan's biggest steelmaker, Nippon Steel Corp  5401.T , said
 on Friday it would secure alternatives for a raw material it
buys from Russia and Ukraine in the event of any supply
disruptions.  urn:newsml:reuters.com:*:nL4N2UZ3D1
    Nippon Steel buys 14% of its iron ore pellets, small balls
of iron ore powder used in steel production, from those
countries. Officials said it switched sourcing to Brazil and
Australia and the impact should be minimal. 
    Agricultural equipment maker Deere & Co  DE.N  said on
Friday it had closed its Ukraine office in recent weeks as a
precautionary measure. It employs about 40 people in Ukraine.
 urn:newsml:reuters.com:*:nFWN2V00WN
    Meanwhile, Delta Air Lines Inc  DAL.N , which does not
operate services to Ukraine or Russia, said on Friday it had
suspended its codesharing service with Russian airline Aeroflot.
 AFLT.MM   urn:newsml:reuters.com:*:nL4N2V049A

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Companies shut Ukraine operations, assess impact of sanctions on
Russia     urn:newsml:reuters.com:*:nL1N2UZ1Y5
FACTBOX-Companies with exposure to Russia     urn:newsml:reuters.com:*:nL1N2UZ1S2
EXPLAINER-Europe braces for economic hit from Ukraine conflict  
  urn:newsml:reuters.com:*:nL8N2UZ541
EXPLAINER-How Western sanctions will target Russia   
 urn:newsml:reuters.com:*:nL8N2UZ8MJ
FACTBOX-How the Ukraine conflict could affect the U.S. economy  
   urn:newsml:reuters.com:*:nL1N2UZ399
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 (Reporting by Ben Klayman in Detroit, Additional reporting by
Gilles Guillaume in Paris and Tom Sims in Frankfurt
Editing by Matthew Lewis)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))