Several companies, including automakers Volkswagen and Renault and tire maker Nokian Tires, on Friday outlined plans to close or relocate manufacturing operations following Russia’s invasion of Ukraine.
After launching an offensive earlier this week, Russian forces stifled their progress on Friday as missiles hit Kiev and officials said they were gearing up for an attack aimed at overthrowing the government.
The United States on Thursday announced broad export sanctions against Russia, reducing its access to global exports of goods ranging from commercial electronics and computers to semiconductors and aircraft parts. This allows companies to change manufacturing plans or look for alternative supply lines.
The attack was a factor at consulting firms JD Power and LMC Automotive, which cut its 2022 global new-car sales outlook from 400,000 vehicles to 85.8 million units. The auto industry was already dealing with a tight supply of vehicles due to a global semiconductor shortage.
“Depending on the severity and duration of the conflict in Ukraine, there will be additional pressure on the already tight supply of vehicles around the world and higher prices,” said Jeff Schuster, president of global vehicle forecasting at LMC.
“Rise in oil and aluminum prices will affect consumers’ willingness and ability to buy vehicles, even if inventories improve,” he said. “We have significantly reduced our forecasts for Ukraine and Russia due to the escalating conflict between the two and the repercussions of sanctions against Russia.”
Wells Fargo analyst Colin Langen said in a research note that the conflict could push oil prices above $100 a barrel, adding inflationary pressure to European and US consumers. Consumers are willing to pay more than the sticker price to get new vehicles, but continued high gas prices could stifle long-term recovery, he said.
Germany’s Volkswagen said it would halt production at two German factories for a few days after delays in making parts in Ukraine.
France’s Renault said it would suspend some operations at its car assembly plants in Russia next week because of logistics constraints caused by a shortage of parts. It did not specify whether its supply chain was affected by the conflict, but a spokesman said the action was a result of reinforced borders between Russia and neighboring countries, through which parts are transported by truck.
The carmaker is one of the Western companies with the most exposure to Russia, where it makes 8% of its core earnings, according to Citibank.
“The disruption is mainly due to strict border controls in transit countries and the forced need to replace many established logistics routes,” the company’s Russian unit said without naming any countries.
Renault-controlled Russian carmaker AvtoVAZ also said it may suspend some assembly lines for a day at a plant in central Russia on Monday, due to persistent global shortages of electronic components. AvtoVAZ also did not mention the invasion in his statement.
Finnish tire maker Nokian said it was moving production of some key product lines from Russia to Finland and the United States to prepare for possible further sanctions after the invasion.
management disruption
Aptiv chief executive Kevin Clark said Thursday that over the past few months the US auto parts maker had switched high-volume parts work from Ukraine in favor of lower-volume products “so we’re in a better position to manage the disruption.” were in.”
Japanese auto supplier Sumitomo Electric Industries, which employs about 6,000 people in Ukraine to make wire harnesses, said it suspended operations at its factories there and asked customers to potentially replace supplies from other locations. was talking about.
Ford Motor Company has a 50% joint venture in Ford Solar, which has three assembly plants in Russia, according to the Ford website. Ford said in a statement that it was “deeply concerned” about the situation and would “manage any impact” on its business in real time.
The US automaker also said it would comply with any legislation on trade restrictions, but declined to discuss whether solar plants have been affected.
While French car parts maker Valeo said the direct impact on the company is minimal, the attack could reduce the industry’s production volume, and increase energy or raw material prices.
For automakers, one of the supply-chain concerns created by Ukraine conflict centers on metals palladium, platinum and rhodium used in exhaust-scrubbing catalytic converters.
Mark Wakefield, co-leader of consulting firm AlixPartners Global Automotive Practice, said Russia produces about 38% of the world’s palladium, excluding recycled materials.
“It’s hard to think of a global auto business that doesn’t have palladium coming from Russia,” he said.
Automakers should not face an immediate shortage of palladium, Wakefield said, as London stocks the metal. “Palladium takes six months of travel before it gets into the car,” he said.
Wakefield said aluminum prices were rising before the Ukraine conflict. The cut in Russian aluminum supplies will add to cost pressures on automakers.
Japan’s largest steel maker, Nippon Steel Corp, on Friday said it would secure substitutes for raw materials it would procure from Russia and Ukraine in the event of any supply disruption.
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 diverted sourcing to Brazil and Australia and the impact should be minimal.
Farm equipment maker Deere & Co said Friday it has closed its Ukraine office in recent weeks as a precaution. It employs about 40 people in Ukraine.
Meanwhile, Russia said it was partially limiting Meta Platforms Inc’s access to Facebook, accusing it of “censoring” Russian media.
Delta Air Lines Inc., which does not operate services to Ukraine or Russia, said on Friday it had suspended its codesharing service with Russian airline Aeroflot.
Amazon.com Inc.’s home security subsidiary, Ring, said it was coordinating with its partners in the squad in Ukraine “to support the safety and well-being of the team and their families.” According to LinkedIn data, the squad employs more than 700 people, some of whom worked for the research arm Ring Ukraine until about a year ago.
Amazon had no additional comment about its footprint in Ukraine or Russia, or what impact the US trade actions will have on its business, if at all.
Toronto-based Kinross Gold Corp said the underground Kupol gold mine in Russia’s far northeastern corner was operating normally. Almost all of the company’s employees in the country are Russian, and Kupol has stored a full year’s supply on site, noting that it operates in a cold region, the company said. Kinross said it was reviewing the latest sanctions against Russia to see how they could affect operations.
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