Lack of parts hits VW production

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A shortage of components is forcing Volkswagen to halt production at two German plants for one day next week, underlining how resurgent global demand is putting industrial supply chains under intense stress.

Europe’s biggest carmaker said it would shut its largest German plant, in Wolfsburg, as well as its Emden plant next Monday because of a shortage of engines.

The stoppage is affecting production of its Golf hatchback, Tiguan sport utility vehicle, Tuaran minivan and Passat saloon, but will not lead to longer delivery times as shortfalls will be made up for at a later stage.

The move shows how suppliers are still struggling to catch up with last year’s demand surge.

“The supply industry overall is under quite a strain. Everyone is struggling,” Dieter Zetsche, chief executive of Daimler, the German premium carmaker, told Reuters at an industry conference on Thursday.

The shortages have worsened after most German carmakers reduced their Christmas production breaks, usually a weak period for the sector.

“All suppliers I spoke to say December and January have been extraordinarily strong months,” said Daniel Schwarz, an analyst at Commerzbank.

German carmakers have seen their order books bulging and report long waiting periods for their most popular cars, driven by rampant growth in emerging markets such as China.

Falk Frey, an analyst at Moody’s, said he expected strong demand from China and the US to drive global car sales up by more than 5 per cent to 76m vehicles this year.

Carmakers and large suppliers are particularly grappling to get hold of electronic components such as microchips and high-grade steel products.

Bosch, the world’s largest car parts supplier by sales, even created a special taskforce last year to ease a supply shortage for semiconductors by screening global markets as well as Bosch’s own business units for unused inventories.

“The taskforce has been so successful that we could even help out our competitors with chips,” a spokesman said.

He added that the family-held group’s capacity utilisation had reached its limits in a number of areas, but said that Bosch had always been able to deliver.

BMW, the world’s largest premium carmaker by sales, said it had at times been forced to transport components by aircraft instead of using trucks to reach assembly lines on time.

Analysts and industry insiders said smaller suppliers were under particular stress, as they struggled to rapidly increase production and as some of them faced working capital constraints.

ZF Friedrichshafen, Germany’s third-largest supplier by sales, said 37 of its suppliers were “critical cases” requiring scrutiny.

The group even bought its supplier Fonderie Lorraine last year to prevent assembly disruptions after the die casting specialist’s owner, Honsel, went into insolvency.

Martin Raab, head of supply chains at Capgemini Consulting, said the current shortages had deeper roots than just the economic situation. “Many carmakers have reduced the number of suppliers in recent years. In some areas, they have made themselves dependent on a few key suppliers,” he said.

In some instances, this has turned the balance of power between carmakers and suppliers on its head. “Some suppliers are currently saying: either you pay our price or we will not deliver,” Mr Raab said.

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