December 8, 2022

Automakers stopped production in the wake of the Russian invasion, and other companies are jostling too

Automakers stopped production in the wake of the Russian invasion, and other companies are jostling too

Feb 25 (Reuters) – Several companies, including automaker Volkswagen, are (VOWG_p.DE) Warren (RENA.PA) Nokian Tires Company for the manufacture of tires (TYRES.HE)On Friday, it outlined plans to close or transform manufacturing operations after the Russian invasion of Ukraine.

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

The United States announced sweeping export restrictions against Russia on Thursday, hampering its access to global exports of goods ranging from commercial electronics and computers to semiconductors and aircraft parts. This may lead to a change in manufacturing plans or a search for alternative supply lines. Read more

Register now to get free unlimited access to Reuters.com

The invasion was a factor in which consulting firms JD Power and LMC Automotive slashed their 2022 global new car sales forecast by 400,000 vehicles to 85.8 million units. The auto industry was already dealing with a shortage of cars due to the global shortage of semiconductors. Read more

“The already tight supply of cars and high prices around the world will be under additional pressure based on the intensity and duration of the conflict in Ukraine,” said Jeff Schuster, head of global vehicle forecasting at LMC.

He added, “It is likely that higher oil and aluminum prices will affect consumers’ desire and ability to purchase cars, even if inventory improves.” “We have made significant reductions in expectations for Ukraine and Russia due to the escalation of conflict between the two countries and the implications associated with sanctions against Russia,” he added.

The conflict could push oil prices above $100 a barrel, which will increase inflationary pressure on European and American consumers, Colin Langan, an analyst at Wells Fargo, said in a research note. He said that while consumers were willing to pay above-label price for new cars, persistently high gas prices could affect the recovery in the long run.

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

France’s Renault said it will suspend some operations at car assembly plants in Russia next week due to logistical bottlenecks caused by a shortage of spare parts. She did not specify whether its supply chain had been affected by the conflict, but a spokeswoman said the measure was the result of strengthening the border between Russia and neighboring countries through which parts are trucked. Read more

The automaker is among the western companies with the most exposure to Russia, earning 8% of its core earnings, according to Citibank.

“The outages are mainly caused by the tightening of border controls in transit countries and the forced need to change a number of existing logistical routes,” the company’s Russian unit said, without naming which country.

Russian car maker AvtoVAZ (AVAZI_p.MM)Renault-controlled company also said it may suspend some assembly lines at a plant in central Russia for a day, on Monday, due to an ongoing global shortage of electronic components. Avtovaz also did not mention the invasion in its statement. Read more

Finnish tire maker Nokian said it would shift production of some major production lines from Russia to Finland and the United States in preparation for possible further sanctions after the invasion. Read more

Disorder management

Over the past two months, the US auto parts maker has replaced high-volume parts from Ukraine in favor of lower-volume products “so we’ve been in a better position to manage disruptions,” Aptiv CEO Kevin Clark said Thursday. Read more

Japan’s Sumitomo Electric Industries, which employs about 6,000 people in Ukraine to manufacture wires, said it has suspended operations at its plants there and is talking with customers about the possibility of replacing supplies from elsewhere. Read more

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

The US automaker also said it would follow any laws related to trade sanctions, but declined to discuss whether Sollers plants were affected.

While the French auto parts maker Valeo (VLOF.PA) He said the direct impact on the company is minimal, and the invasion could reduce industry production volumes, and raise energy or raw material prices.

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

Russia produces about 38% of the world’s palladium, excluding recycled materials, said Mark Wakefield, co-chair of global consulting firm AlixPartners specializing in the auto industry.

“It’s hard to think of a global car company where palladium doesn’t come from Russia,” he said.

Wakefield said automakers should not face an immediate palladium shortage, because there are stocks of the metal in London. There is a “six-month journey before the palladium finds its way into the car,” he said.

Wakefield said aluminum prices had been rising before the conflict in Ukraine. Cutting off Russian aluminum supplies will increase cost pressures on automakers.

Nippon Steel, Japan’s largest steelmaker, said Friday that it will secure substitutes for the raw materials it buys from Russia and Ukraine in the event of any supply disruption.

Nippon Steel buys 14% of its iron ore pellets, which are small pellets of iron ore powder used in steel production, from those countries. Officials said it has shifted sources to Brazil and Australia and the impact should be minimal.

Agricultural Equipment Manufacturer Deere & Co (den) On Friday, it said it had closed its Ukraine office in recent weeks as a precaution. It employs about 40 people in Ukraine.

Meanwhile, Russia said it is partially restricting access to Meta Platforms Inc (FB.O) Facebook accused her of “censoring” Russian media. Read more

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

Ring, Amazon.com Inc’s home security company, said it coordinates 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 in the research arm of Ring Ukraine until a year ago.

Amazon had no further comment about its footprint in Ukraine or Russia, or about how, if any, US trade actions would affect its business.

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

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

Register now to get free unlimited access to Reuters.com

(Additional reporting by Ben Klayman in Detroit; Additional reporting by Jill Guillaume in Paris, Tom Sims in Frankfurt, Joseph White in Detroit, Ernest Scheider in Houston and Jeffrey Dustin in San Francisco; Editing) by Matthew Lewis

Our criteria: Thomson Reuters Trust Principles.