Automakers slow production after Russian invasion, other companies scramble too


Feb. 25 (Reuters) – Several companies, including automakers Volkswagen (VOWG_p.DE) and Renault (RENA.PA) and tire maker Nokian Tires (TYRES.HE), said on Friday plans to close or relocate manufacturing operations after Russia invaded Ukraine. .

After invading earlier this week, Russian forces continued their advance on Friday as missiles pounded Kiev and authorities said they were preparing for an assault aimed at overthrowing the government. Read more

The United States announced sweeping export restrictions on Russia on Thursday, hammering its access to global exports of goods ranging from commercial electronics and computers to semiconductors and aircraft parts. This could cause companies to change their manufacturing plans or seek alternative supply lines. Read more

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The invasion was a factor in consultancies JD Power and LMC Automotive slashing their 2022 global new-car sales outlook from 400,000 vehicles to 85.8 million units. The automotive industry was already facing a limited supply of vehicles due to the global shortage of semiconductors. Read more

“An already tight supply of vehicles and high prices around the world will come under additional pressure due to 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 buy vehicles, even if inventories improve,” he added. “We have significantly downgraded the outlook for Ukraine and Russia due to the escalating conflict between the two and the repercussions associated with sanctions against Russia.”

The dispute could push oil prices above $100 a barrel, adding inflationary pressure on European and American consumers, Wells Fargo analyst Colin Langan said in a research note. While consumers were willing to pay more than list price for new vehicles, the sustained rise in gasoline prices could impact the long-term recovery, he said.

German Volkswagen said it would halt production for a few days at two German plants after a delay in manufacturing parts in Ukraine. Read more

France’s Renault has announced it will suspend some operations at its car assembly plants in Russia next week due to logistical bottlenecks caused by parts shortages. It did not say whether its supply chain had been affected by the dispute, but a spokeswoman said the action was a consequence of the tightening of borders between Russia and neighboring countries through which the parts are passed. transported by truck. Read more

The automaker is among the Western companies with the most exposure to Russia, where it earns 8% of its core profits according to Citibank.

“The disruptions are mainly 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.

Renault-controlled Russian carmaker Avtovaz (AVAZI_p.MM) also said it may suspend some assembly lines at a factory in central Russia for a day on Monday due to a continuing global shortage of electronic components. Avtovaz also did not mention the invasion in his statement. Read more

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 after the invasion. Read more

MANAGE DISRUPTIONS

Aptiv chief executive Kevin Clark said Thursday that over the past two months the U.S. auto parts maker has swapped high-volume parts out of Ukraine in favor of low-volume products “so we were best placed to manage disruptions”. Read more

Japanese auto supplier Sumitomo Electric Industries, which employs some 6,000 people in Ukraine to manufacture wire harnesses, said it had suspended operations at its factories there and was talking to customers about the possibility of replacing supplies from other places. Read more

Ford Motor Co (FN) owns a 50% joint venture in Ford Sollers, which has three assembly plants in Russia according to Ford’s website. Ford said in a statement it was “deeply concerned” about the situation and would “manage any effect” on its business in real time.

The U.S. automaker also said it would follow all trade sanctions laws, but declined to say whether Sollers factories were affected.

While French auto parts maker Valeo (VLOF.PA) said the direct impact on the business is minimal, the invasion could lead to lower industry production volumes and higher oil prices. energy or raw materials.

For automakers, one of the supply chain concerns created by the conflict in Ukraine is the metals palladium, platinum and rhodium used in catalytic converters for exhaust gas cleaning.

Russia produces about 38% of the world’s palladium, excluding recycled materials, said Mark Wakefield, co-head of global automotive practice at consultancy AlixPartners.

“It’s hard to think of a global automotive company that doesn’t have palladium from Russia,” he said.

Carmakers are unlikely to face an immediate shortage of palladium, Wakefield said, because there are stocks of the metal in London. There’s “a six-month journey before the palladium ends up in a car,” he said.

Aluminum prices had risen before the Ukraine conflict, Wakefield said. A cut in the supply of Russian aluminum would add to cost pressures for automakers.

Japan’s biggest steelmaker, Nippon Steel Corp, said on Friday it would find alternatives for a raw material it buys from Russia and Ukraine in the event of a supply disruption.

Nippon Steel sources 14% of its iron ore pellets, small balls of iron ore powder used in steel production, from these countries. Officials said it had shifted its supply to Brazil and Australia and the impact should be minimal.

Agricultural equipment maker Deere & Co (DE.N) said on Friday it had closed its Ukrainian office for the past few weeks as a precautionary measure. It employs around 40 people in Ukraine.

Meanwhile, Russia said it was partially restricting Meta Platforms Inc’s (FB.O) access to Facebook, accusing it of “censoring” Russian media. Read more

Delta Air Lines Inc (DAL.N), which does not operate services to Ukraine or Russia, said on Friday it had suspended its codeshare service with Russian airline Aeroflot. (AFLT.MM) find out more

Amazon.com Inc’s home security subsidiary, Ring, said it was coordinating closely with its Squad partners in Ukraine “to support the safety and well-being of the team and their families.” According to LinkedIn data, Squad employs more than 700 people, some of whom worked for research arm Ring Ukraine until about a year ago.

Amazon did not comment further on its footprint in Ukraine or Russia, or the impact of U.S. trade actions on its business, if any.

Toronto-based Kinross Gold Corp (K.TO) said its Kupol underground gold mine, located in Russia’s far northeast, was operating normally. Almost all of the company’s employees in the country are Russian, and Kupol has stocked a full year’s worth of supplies on site given that it operates in a cold region, the company said.

Kinross added that he was reviewing the latest sanctions against Russia to see how they might affect operations.

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Reporting by Ben Klayman in Detroit, Additional reporting by Gilles Guillaume in Paris, Tom Sims in Frankfurt, Joseph White in Detroit, Ernest Scheyder in Houston and Jeffrey Dastin in San Francisco Editing by Matthew Lewis

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