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March 15, 2022 10:28 AM

Ukraine parts shortages put 15% of European auto output at risk, analyst says

A shortage of wire harnesses built in Ukrainian factories that have closed after the Russian invasion could affect 700,000 vehicles in the first half of the year.

Bloomberg
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    wire harness production 2022
    Bloomberg

    Up to 15 percent of European auto production could be at risk because of shutdowns at wire-harness factories in Ukraine after the Russian invasion, an analyst said.

    Colin Langan, an auto analyst at Wells Fargo, said in a report that the closing of the harness factories may lower output by as much as 700,000 vehicles in the first and second quarters. That lost production could potentially be recouped later in the year, he said. 

    Volkswagen Group and BMW have already cut production in Germany because of the supply disruption, while Mercedes-Benz has reduced output at factories in Germany and Hungary.

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    Ukraine has 17 wire-harness facilities, ranking behind only Romania and Morocco among countries with lower-cost locations, according to Wells Fargo’s Langan.

    German supplier Leoni made wire harnesses at two factories in western Ukraine employing about 7,000 people prior to Russia’s invasion. The Bavaria-based company lowered forecasts on Monday for annual sales and earnings, warning it would not be able to make up for lost production from the facilities this year. 

    While Leoni plans to double output at some locations outside Ukraine, those adjustments could take at least two to three months.

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    If VW is unable to get supply of wire harnesses for more than three or four weeks, the automaker will have to revise its outlook, CEO Herbert Diess said Tuesday. The company has redirected semiconductors for 50,000 to 100,000 vehicles to assembly plants in China and the U.S. because of the disruptions to its European supply chain.

    The disruptions tied to wire-harness production and the Russia-Ukraine conflict have added to production challenges for the automotive industry that include continuing COVID-19 restrictions, the semiconductor shortage and rising prices for raw materials.

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