Ukraine plant shutdowns put 15% of Europe car output at risk

[LONDON] The war in Ukraine could cost Europe's automakers production of hundreds of thousands of vehicles because the country is a key source of wire harnesses that power car electrical systems.

The shutdown of wire-harness plants in Ukraine may lower output by as much as 700,000 vehicles in the first and second quarters, Colin Langan, an auto analyst at Wells Fargo, said in a report.

Volkswagen (VW) and BMW have already idled factories due to the supply disruption, while Mercedes-Benz has reduced output at a German factory.

German auto supplier Leoni made wire harnesses at 2 factories in western Ukraine employing about 7,000 people prior to Russia's invasion. The Bavaria-based company lowered forecasts on Monday (Mar 14) for annual sales and earnings, warning it won't be able to make up for lost production from the facilities this year. While the parts maker plans to double output at some locations outside Ukraine, those adjustments could take at least 2 to 3 months.

If VW is unable to get supply of wire harnesses for more than 3 or 4 weeks, the carmaker will have to revise its outlook, chief executive officer Herbert Diess said on Tuesday. The company has redirected semiconductors for 50,000 to 100,000 vehicles to assembly plants in China and the US because of the disruptions to its European supply chain.

Ukraine has 17 wire-harness facilities, ranking behind only Romania and Morocco among countries with lower-cost locations, according to Wells Fargo's Langan. He estimates the supply issue could affect 10 per cent to 15 per cent of European auto production and sees potential for output to be recouped within the year. BLOOMBERG

KEYWORDS IN THIS ARTICLE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes