Ukraine War Creating Parts Shortages for BMW, VW - The Detroit Bureau

2022-05-21 16:47:19 By : Mr. Jackie Luo

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home > news > Automakers > Ukraine War Creating Parts Shortages for BMW, VW

BMW and Volkswagen AG, which depend on exports to bolster sales in the United States, report they are facing shortages of critical components made in Ukraine, now the midst of a deadly conflict with Russia, slowing production at the group’s key assembly plants in Germany. 

The disruption and shortages come as both companies are attempting to ramp up production of battery-electric vehicles for sale in the U.S. and Canada. 

Herbert Diess, CEO of the Volkswagen Group, said during the company’s annual press conference this week the shortages created by the war raging in Ukraine have disrupted the flow of wiring harnesses made for plants in Germany. The disruption has forced production cuts at plants in Germany and other parts of central Europe, Diess said. 

In a sign of how serious the situation has become; Diess said the company is already shifting some production of critical components and vehicles to North and South American as well as China. 

“Obviously this will take some time,” he said.  

Since the Berlin Wall fell in 1989, European automakers have moved component production east, searching for less expensive labor much as manufacturers in North America have done with Mexico. 

Diess said Volkswagen said it was continuing to support its Ukrainian suppliers of wiring harnesses as they try to keep up operations. “We cannot expect that this continues,” he said, noting VW is shifting production, which will take some time. 

Efforts to shift work to China, however, could be hobbled by outbreaks of COVID-19. Chinese authorities, despite the use of vaccines, have ordered lockdowns to stop the spread disrupting economic activity in many areas, according to reports from China. 

BMW also said during the company’s annual press conference this week the bottlenecks at its suppliers in Ukraine have forced the automaker to adjust or interrupt production at a number of factories, which is likely to have a negative impact on vehicle sales figures. 

“Ukraine is, of course, home to many suppliers, hence we too will have to face production interruptions and supply disruptions for important components,” Maximilian Schöberl, BMW’s director of corporate affairs, said in an earnings webcast. 

Like at Volkswagen, BMW executives said wiring harnesses, which bundle and organize wires or cables, were in short supply because their main suppliers were in western Ukraine, which so far has been spared the worst of the Russian invasion but where life has been disrupted by the influx of thousands of refugees and wartime callups of reservists and volunteer fighters. 

BMW said the war forced its suppliers to reduce or suspend production of the harnesses, which in turn forced the automaker to cut its own output. BMW said it is resuming production at two factories in Germany this week, while its Mini factory in Oxford, England, is expected to restart next week. 

“But what is clear is that the situation will remain volatile,” Schöberl said. 

BMW finance chief Nicolas Peter noted the jump in raw material prices is expected to cost the company hundreds of millions of euros. The war exacerbates worries about restricted supplies from Russia, a major producer of metals such as nickel and palladium, which are widely used in automotive production.

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