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Ukrainian Auto Parts Supply Disruption Stops Car Factories

by Ozva Admin
Ukrainian Auto Parts Supply Disruption Stops Car Factories

Russia’s invasion of Ukraine It is having an impact on the global auto industry, with the strongest effects on European automakers that have relied on Ukrainian factories to produce components for their cars.

Ukraine’s foreign investment office identifies BMW, Mercedes-Benz and the Volkswagen Group brands Audi, Bentley, Lamborghini, Porsche and Volkswagen as automakers that rely on parts from the country’s supply plants.

That government agency says that before the invasion, the country had 38 factories operated by 22 companies from six different countries, which represents an investment (since 1998) of more than $550 million. The industry employed about 60,000 Ukrainians. Companies include Bader, SEBN, Prettl, Nexans, Kromberg & Schubert, Yazaki, Fujikura, Leoni, and Aptiv.

Among these companies, Aptiv CEO Kevin Clark told reporters at a Barclay’s conference last month in Miami that his company had already moved high-volume production out of Ukrainian plants in anticipation of the invasion. But most companies didn’t, leaving their customers without the parts needed to build cars.

Of the 22 suppliers working in Ukraine, half make wiring harnesses, while the rest make other electronic parts, seats, plastic parts and heaters. A company repairs electric starter motors. The consultancy AlixPartners estimates that nearly 7 percent of the wiring harnesses used in European automotive production come from Ukraine.

The Ukrainian government noted that the costs of producing cars in the country are 25 percent of the cost of manufacturing cars and their parts in Germany and that Ukrainian labor is 38 percent of the cost of Chinese labor. Also, due to plants that were closed in the 2008 recession and never reopened, Ukraine has production capacity, while most plants in Europe are at full capacity.

SEBN describes the parameters of its wiring harnesses for Volkswagen Golf and Audi Q7 on its website. The Golf’s harness weighs between 27 and 55 pounds, while it weighs up to 100 pounds. in a Q7. It includes around 600 individual cables in the Golf and almost twice as many in the Q7. Plugging them in requires 150 connectors for the Golf and 250 for the Audi. The Golf’s total wiring length spans more than 3,200 feet, and the Q7 carries almost 10,000 feet of wiring.

Among the production stoppages so far, BMW, Mercedes-Benz and Porsche have announced that they have halted some assembly lines as a result of the Russian attack on Ukraine. Porsche highlighted its highly sought after Taycan EV as a victim of its closure.

“Porsche views the armed conflict in Ukraine with great concern and dismay,” the company said in a press release. “We continue to wait for a cessation of hostilities and a return to diplomacy. We are convinced that a sustainable solution to the conflict can only take place on the basis of international law. In all activities on the site, the safety and integrity of people is the highest priority.”

Porsche’s main plant, which makes the 911 and 718 sports cars, has not been affected so far, along with the Cayenne factory in Bratislava, Slovakia. “On the other hand, the company was forced to suspend production of the Taycan in Stuttgart-Zuffenhausen from this Wednesday, March 9, initially until the end of next week,” Porsche said.

Image courtesy of Porscheb-Vormontage-8541.jpeg

Porsche’s Taycan assembly line has been halted due to a shortage of Ukrainian-supplied wiring harnesses.

The ferocity of the war suggests that the supply of these parts will not improve anytime soon. “It is similar to what we have in the US with the shortage of chips,” he observed. Nick Klein, vice president and head of the Midwest office for OEC Group, a logistics specialist.

Ukraine is one of the leading producing countries for wiring harnesses, and its advantages were its own local natural resources to produce them and its proximity to customers’ assembly plants in Europe. Alternatives would come from Tanzania, China or Mexico, he said, bringing up the issue that international shipping is currently expensive and unreliable.

And for a non-target-cost manufacturer like a high-end automaker, even airfreight isn’t necessarily a solution, Klein said. That’s because most air cargo planes are currently engaged in transporting covid vaccines around the world.

There will be plenty of cars sitting around waiting for a wiring harness,” Klein concluded.

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