Home Business amount European car factories halted by lack of low-cost Ukrainian components

European car factories halted by lack of low-cost Ukrainian components


Inside each car is almost five kilometers of electrical cables. Serpentine wires carry instructions, from steering the wheels to opening the trunk.

This hodgepodge of automotive spaghetti is held together by the harness, an inexpensive part that, until the invasion of Ukraine, automakers almost took for granted.

BMW and Volkswagen have both been forced to close factories across Europe after the invasion of Russia forced Ukrainian wiring factories to close.

Now the country’s nascent auto industry, which has nearly 40 parts factories, is under threat, as automakers rush to move or duplicate the bespoke equipment needed to make harnesses.

“The problem with cable harnesses is that they are fundamental,” said Alexandre Marian, managing director of consultancy AlixPartners in Paris. “You can’t start assembling even an incomplete car without wiring harnesses.”

Unlike other parts that can be easily made elsewhere, harnesses are custom made. Each car model has its own individual system, perfected to the millimeter, so manufacturers can clamp cables around the vehicle.

Herbert Diess, Managing Director of VW, said: “In our case, as we are positioned in premium or close to premium, most of the wiring harnesses we install in cars are car specific. So it’s a one-to-one relationship.

But moving production is a logistical headache.

“They’re a mix of different cables, you can’t put all 100 pieces together in a box and ship it,” a person familiar with the process explained. “They are a big transportation problem.”

VW’s Diess said: “Currently we are. . . trying to get the most out of the production of wiring harnesses in Ukraine, but in parallel, from the start of the conflict, we started working on alternatives, which are on the way.

These alternatives include moving the equipment, which is difficult with unreliable border crossings, or replicating it from scratch, which is expensive and time-consuming.

Leoni, who has two sites in the country as well as factories in Serbia, Romania and North Africa, said he is “working almost around the clock to continuously analyze and assess dynamic developments on site.”

“We are currently reviewing all options to compensate for production disruptions,” the company said.

“There’s a fair amount of skilled manual labor involved in harness manufacturing,” said Dominic Tribe, a supply chain expert at Vendigital consultants. “It’s complicated with sometimes miles of cables and hundreds of connectors that have to be manually wrapped and tested.”

The new equipment needed to build harnesses ranges from £100,000 to around £2million, he said, and takes between three and six months to build, according to industry estimates.

Some Mini customers have been told to expect further three-month delays, while new factories are found to manufacture the parts.

“We are working with our suppliers affected by the Ukrainian crisis to find solutions together, and to support them in the implementation of these solutions, whether it is a question of maintaining production in Ukraine or in alternative locations”, added said BMW, which closed two German factories and the Mini factory. UK.

Even though BMW and VW have restarted their factories, they will not be able to manufacture models whose harnesses remain stuck in Ukraine.

Some suppliers in Ukraine have started restarting operations, according to automakers, suppliers and people familiar with the situation.

On Tuesday, VW said nine of its 11 suppliers in the country were operating, but at reduced capacity. “We are able to produce in most of our factories, but [at] a reduced capacity rate,” Diess said.

A big problem is the shipment of finished products across the Polish and Ukrainian border to waiting car factories.

There is a severe shortage of truck drivers, who are mostly male and hit by conscription laws that prohibit them from leaving the country.

Some factories have turned to former retirees, who have passed the age limit for conscription, to ship products, according to an employee of one of the Ukrainian groups.

Many trucking companies outside the country are reluctant to send vehicles across the border for fear they won’t return, according to two people briefed on the situation.

Even once trucks and drivers are located, border crossings have been completely overwhelmed with refugees and are virtually closed to traditional commercial freight.

“If you send a truck, you can’t say whether it will be in Poland in three hours or three days or whether it will be sent back,” one person said. “We have to check day by day, is it possible to send a truck today, or two trucks.”

“Indeed, at this point, the country is not open to any kind of normal business activity,” said Joseph Massaro, chief financial officer of Aptiv, a U.S. auto parts supplier.

The company, which has two factories in western Ukraine, has begun moving parts out of the country to existing Aptiv facilities in Poland, Romania and Serbia. The relocation, which is being helped by VW, also includes workers and their families, people familiar with the operation said.

However, in Ukrainian factories, workers have been largely spared violence, according to several of the suppliers operating in the country.

Because assembling harnesses requires extreme dexterity, most factory employees are usually women, who are not covered by Ukrainian conscription laws for men between 18 and 60 years old.

One supplier estimated that three quarters of its workers are women, many of whom have offered to come to work if it is safe.

“It’s amazing how motivated and willing people are to support the business,” said an official from one of the procurement groups.

But for Ukraine, the risk is that if automakers move production west, the harness industry in the country could suffer a terminal decline, several executives have said privately.

Aptiv’s Massaro added, “Obviously in the long term we will have to assess if and when it makes sense to return to Ukraine.”