BERLIN (Bloomberg) – Volkswagen AG will halt production at its main factory in Wolfsburg, Germany, on Monday, because of a shortage of engines and other parts.
BMW AG, Porsche SE and Mercedes-Benz also said supply constraints leave them with little room to move.
Carmakers are feeling the pinch of tight component supplies as parts makers struggle to keep pace with resurgent vehicle demand.
“The problem we have is that other businesses we're dependent on closed capacity” during the recession, Lars Holmqvist, CEO of European auto suppliers association Clepa, said in a telephone interview from Brussels. “Electronics are particularly tight. It's a real problem and it's growing.”
Booming demand for German cars in China and the U.S., the world's two biggest auto markets, shows no signs of abating.
VW aims to increase deliveries this year 5 percent after record sales of 7.14 million vehicles in 2010. BMW and Daimler are boosting 2011 capacity to keep up with demand, which in turn puts pressure on suppliers to invest scarce capital.
“Suppliers are under a lot of strain” because of the upfront financing required to increase production, said Christoph Stuermer, a Frankfurt-based analyst at IHS Automotive. “Some suppliers are getting to the point that they just can't produce parts” without help from carmakers.
Shift to batteries
The relationship between suppliers such as Robert Bosch GmbH, Valeo SA and Pirelli & C SpA and the automakers has tightened as development times shorten and car companies insist components be delivered shortly before assembly to reduce inventory costs. At the same time, the gradual shift to battery-powered vehicles offers little incentive to invest in aging technologies.
“We have started the decline of the combustion engine and that will kill companies,” Holmqvist said. “The banks are still very cold” because of lingering impacts of the recession, concerns about the sustainability of the recovery and the advent of electric cars.
Component manufacturers are critical to the automotive industry, accounting for about 75 percent of the value of an average car, up from 65 percent 10 to 15 years ago, said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch-Gladbach, Germany.
Porsche is considering shifting some production of its Cayman and Boxster models to a VW plant in Osnabrueck, Germany, David McAllister, Lower Saxony Prime Minister and a VW supervisory board member, said Wednesday in Qatar. Porsche is grappling with record orders and weighing the addition of a compact SUV vehicle to its lineup.
“The supply situation is no doubt extremely strained at the moment,” Porsche spokesman Dirk Erat said by phone. “It's very important that nothing goes wrong; the chain of logistics must be kept running.”
The three-shift shutdown at Volkswagen's biggest factory, which followed a canceled shift on Jan. 22, is designed to help stabilize parts supplies after a shortened break over the Christmas holidays, VW spokesman Christoph Adomat said. The one-day closure affects the production of about 3,000 Golf hatchback, Tiguan SUV and Touran minivan models, he said.
The three-day weekend will be used to install equipment for the planned expansion of the body shop for the Tiguan, Adomat said, adding that lost production can be made up and won't lengthen delivery times. VW aims to increase production of the Tiguan to 1,000 a day from 700.
BMW, which is forecasting record sales of more than 1.5 million BMW, Mini and Rolls-Royce models this year, completed an expansion of its U.S. factory late last year and will spend 400 million euros at a plant in Leipzig, Germany, to prepare for the production of an electric city car by 2013.
“Parts have been tight for us but we've found ways to keep the assembly lines rolling,” said Frank Wienstroth, a spokesman for BMW in Munich.
The same goes for Mercedes, which projects record sales as it rolls out new versions of the CLS luxury coupe and SLK hard- top roadster.