The war in Ukraine shakes automotive suppliers - Economic Policy

The war in Ukraine shakes automotive suppliers – Economic Policy

Fewer cables, factories shut down, and doubts about neon supplies: the war is hitting the Ukrainian auto parts industry hard, which supplies many European equipment manufacturers.

After having seen its car production collapse with the fall of the USSR, Ukraine has been experiencing a boom in parts manufacturers since the 2000s. Close to the European Union, with its skilled workers and low labor costs, the country has attracted around twenty manufacturers, notably German ones, such as Bosch, Kostal and Prettl. They employed a total of 60,000 people in 38 factories in 2021, according to the Ukrainian government.

The workers there produce electronic components, seats, but above all electrical cable networks. A large SUV like the Porsche Panamera hauls many miles.

Ukraine exported 760 million euros worth of cables to the EU in 2021, for the automotive industry but also for aeronautics, according to the European liaison committee of equipment manufacturers (Clepa).

“Each car has its specific network of cables”, which require up to 10 or 15 hours of manual work, and are delivered “just in time”, i.e. in 3 to 4 days, explained Volkswagen boss Herbert Diess at the start. march.

Most of the parts factories, located in western Ukraine and employing mostly women, “still work to some extent”, but “transporting the parts from there is just as difficult”, stresses the general secretary du Clepa, Sigrid de Vries.

Cascading problems

At the Polish border, the Bosch factory in Krakovets has “slowly” resumed the manufacture of spare starters “at the request of the 180 employees who are employed there and who wanted to start working again”, the number one told AFP. world of auto parts.

“The strictest security conditions continue to apply to employees working on site”, underlines the German group, which says it has paid “several months’ wages in advance”.

At the same time, many equipment manufacturers are trying to duplicate their production in neighboring countries. A few days before the start of the war, the Irish Aptiv moved its cable production to Poland, Romania and Serbia.

Cable production “is not that complicated to relocate, these are relatively simple tools”, underlines Alexandre Marian of the firm AlixPartners. “But it requires a fairly heavy organization and good preparation”. “The ramp-up can take between two and six months”, tempers Sigrid de Vries.

The Clepa representative also describes the collateral effects of the war on industry: car factories in Eastern Europe employ many Ukrainians, some of whom would have returned to fight. And parts like automobiles are transported by many Ukrainian drivers too.

Result: after a month of war, factories were put on hold at Volkswagen, BMW or Renault.

Ukraine, a major steel producer, is also the world’s largest exporter of neon, used in the manufacture of electronic chips. If the industrial tool has adapted after the annexation of Crimea by Moscow in 2014, and that the stocks are sufficient, “it could be a problem in the medium term”, but much lower than the shortages of Russian raw materials, according to Alexandre Marian, at AlixPartners.

More broadly, it is above all the rise in energy prices (gas, oil, electricity) that worries the sector the most. The war is clouding the outlook for the automotive market, already held back by the pandemic, then by the shortage of electronic chips, logistical problems and rising raw material costs.

Global sales are expected to fall another 2% in 2022, particularly in Europe, against an increase of 4 to 6% expected so far, the firm Standard & Poor’s (S&P) said on Tuesday.

And while automakers have managed to raise prices and protect their margins, OEMs must strike a “very delicate balance” between cost increases from their suppliers and their customers, the automakers, notes Vittoria Ferraris of S&P.

“Some manufacturers and equipment manufacturers will find themselves in difficulty”, predicts Alexandre Marian. In the automotive production chain, “there is bound to be a weak link somewhere”.

After having seen its car production collapse with the fall of the USSR, Ukraine has been experiencing a boom in parts manufacturers since the 2000s. Close to the European Union, with its skilled workers and low labor costs, the country has attracted around twenty manufacturers, notably German ones, such as Bosch, Kostal and Prettl. They employed a total of 60,000 people in 38 factories in 2021, according to the Ukrainian government. The workers there produce electronic components, seats, but above all electrical cable networks. A large SUV like the Porsche Panamera hauls many miles. Ukraine exported 760 million euros worth of cables to the EU in 2021, for the automotive industry but also for aeronautics, according to the European liaison committee of equipment manufacturers (Clepa). “Each car has its network specific cables”, which require up to 10 or 15 hours of manual work, and are delivered “just in time”, i.e. in 3 to 4 days, explained Volkswagen boss Herbert Diess in early March. of parts, located in western Ukraine and employing mainly women, “still work to a certain extent”, but “transporting the parts from there is just as difficult”, underlines Clepa’s general secretary, Sigrid de Vries. At the Polish border, the Bosch factory in Krakovets has “slowly” resumed the manufacture of spare starters “at the request of the 180 employees who are employed there and who wanted to start working again”, told AFP the world’s number one auto parts company. “The strictest safety conditions continue to apply to employees working on site”, underlines the German group, which says it has paid “several months’ wages in advance”. At the same time, many equipment manufacturers are trying to duplicate their production in neighboring countries. A few days before the start of the war, the Irish Aptiv moved its cable production to Poland, Romania and Serbia. Cable production “is not that complicated to relocate, these are relatively simple tools”, underlines Alexandre Marian of the firm AlixPartners. “But it requires a fairly heavy organization and good preparation”. “The ramp-up can take between two and six months”, tempers Sigrid de Vries. The Clepa representative also describes the collateral effects of the war on industry: car factories in Eastern Europe employ many Ukrainians, some of whom would have returned to fight. And parts like automobiles are transported by many Ukrainian drivers too. Result: after a month of war, factories were put on hold at Volkswagen, BMW or Renault. Ukraine, a major steel producer, is also the world’s largest exporter of neon, used in the manufacture of electronic chips. If the industrial tool has adapted after the annexation of Crimea by Moscow in 2014, and that the stocks are sufficient, “it could be a problem in the medium term”, but much lower than the shortages of Russian raw materials, according to Alexandre Marian, at AlixPartners. More broadly, it is above all the rise in energy prices (gas, oil, electricity) that worries the sector the most. The war is clouding the outlook for the automotive market, already held back by the pandemic, then by the shortage of electronic chips, logistical problems and rising raw material costs. Global sales are expected to fall another 2% in 2022, particularly in Europe, against an increase of 4 to 6% expected so far, the firm Standard & Poor’s (S&P) said on Tuesday. And while automakers have managed to raise prices and protect their margins, OEMs must strike a “very delicate balance” between cost increases from their suppliers and their customers, the automakers, notes Vittoria Ferraris of S&P. “Some manufacturers and equipment manufacturers will find themselves in difficulty”, predicts Alexandre Marian. In the automotive production chain, “there is bound to be a weak link somewhere”.

.

Comments

0 comments

Leave a Comment

Your email address will not be published.