Normally on this Friday, the Supply Chain Matters blog would be publishing our This Week in Supply Chain Tech column reflecting noteworthy technology highlights in the world of supply chain technology.

However, a number of business developments this week concerning multi-industry supply and customer demand networks should occupy the attention our readership community. Thus, we felt compelled to provide brief synopsis of this week’s global supply and customer demand network significant developments, among them being:  Global Trade

U.S. Companies and Trade Associations Formally Voice Concern on Added Tariff Threats

North American Supply Networks Remaining On Edge Regarding Tariff Actions

Brexit Fallout: Ford Motor Formally Announces Closure of UK Engine Production Facility

Stepped-up Movement of High-Tech Supply Networks Out of China

Volkswagen Announced $1 Billion Investment in Battery Manufacturing

Huawei Fallout Continuing Across High Tech Supply Networks

 

U.S. Companies and Trade Associations Formally Voice Concern on Added Tariff Threats

More than 600 U.S. based companies and trade associations signed a collective letter addressed to both President Trump and National Economic Advisor Larry Kudlow, urging the Trump Administration to “get back to the negotiating table” in an effort to avoid threatened added tariffs on goods imported from China. The letter came as the President continues to threaten China with tariffs involving nearly all intermediate goods and finished products being imported from that country.

According to the latest reporting, both President Trump and China’s President Xi Jinping were supposed to meet at the Group of 20 summit meeting being held later this month, but reports indicate that no formal meeting has been arranged thus far.

Quartz additionally reports that a group of Fortune 500 CEO’s told reporters that the Trump Administration’s trade wars are hurting American companies and threaten the stability of the global economy. The report indicated that: “CEO’s openly criticized President Trump’s reliance on tariffs as a diplomatic too, and said the White House wasn’t taking corporate America’s advice on the situation.” They called on the United States and China to resolve their trade differences.

Specifically noted was U.S. engine manufacturer Cummins, which now indicates that all of the gains from the Trump Administration’s 2017 corporate tax cuts will be lost this year to added tariffs.  The manufacturer indicated the company will incur a $150 million annualized expense from added tariffs.

Cummins CEO Tom Linebarger is quoted as indicating: ” “Our net taxes are higher now”. Linebarger was joined by JP Morgan CEO Jamie Dimon and IBM CEO Ginni Rometty. Dimon reportedly characterized the gathering as an attempt to “educate” politicians and voters about the impact of trade tariffs, as well as other White House policy.

 

North American Supply Networks Remain On Edge Regarding Tariff Actions

The Wall Street Journal reported this week that North American based auto supply networks continue to weather trade-related fallouts, despite the last-minute deal reached among the U.S. and Mexico regarding President Trump’s threatened added 5 percent tariffs on Mexico imports.

The report indicates that the threat of added tariffs sent automakers and suppliers scrambling to mitigate impacts, with some auto makers doubling or tripling import shipments to get ahead of the tariff imposition. General Motors CEO Mary Barra traveled to Capital Hill to brief a delegation of lawmakers in a closed-door concerning the economic impact to GM alone. The report quotes a lawyer who works with auto suppliers as indicating that the industry supply networks remain on-edge and was not reassured by what has happened.

 

Brexit Fallout: Ford Motor Formally Announces Closure of UK Engine Production Facility

After weeks of speculation, Ford Motor announced plans to shutter its engine manufacturing facility located in Bridgend, South Wales.

Production will reportedly be shifted to Mexico. Ford indicated that the decision was a necessary step to create a more efficient and focused business across Europe.

In May, the global auto maker announced that it was cutting 10 percent of its global salaried workforce, upwards of 7000 employees to reverse profit declines. The action was part of an outlined multi-year restructuring plan that would result in upwards of $11 billion in added charges.

Regarding the announcement, Ford indicated that declining demand for the three-cylinder Dragon engine led up to this decision, along with three other engine plants producing the engine, including one in Mexico. Closure was reportedly driven by expected ending of planned future supply contracts and a phasing out of the 1.5 liter GTDI Sigma EcoBoost engine. Thus, after the year 2020, the argument was that there would only be demand for the Dragon model engine.

The UK engine manufacturing facility directly employs upwards of 1700 workers, not counting a UK based supply network employing hundreds more.

Ford is offering Bridgend employees a described enhance separation package which includes help with reemployment to other Ford UK sites or support for re-training for other skills.

The Bridgend announcement in some part, also relates to continued fallout and uncertainty brought about by the ongoing political crisis related to Brexit, the United Kingdom’s expected departure from the European Union.

 

Stepped-up Movement of High-Tech Supply Networks Out of China

This week, The Wall Street Journal has published several reports indicating the movement of electronics supply chains out of China is picking up speed. They include Nintendos actions in shifting some production of the maker’s Switch game console to Southeast Asia, while Japan based Ricoh plans to shift some production from China as-well. Last week, Japan based Sharp Corp. indicated it would start to produce some models of personal computers in Taiwan or Vietnam.

This week, Supply Chain Matters highlighted reports that electronics contract manufacturer Foxconn Technology indicated it was prepared to move production out of China, including Apple iPhones based on major customer needs.

 

Volkswagen Announces $1 Billion Investment in Battery Manufacturing

This week, global auto manufacturer Volkswagen announced upwards of a $1 billion investment in battery production, specifically forming a joint venture with Swedish based Northvolt. Coupled with a European Investment bank loan, the investment will fund a new production plant in northern Sweden along with a joint venture with VW that other auto makers can take part in.

According to reporting by The Wall Street Journal, Northvault has ambitious to take on established battery suppliers Samsung, LG Chem and Panasonic. Sweden was selected because of its plentiful supply of hydro-electric power needed for an energy-intensive manufacturing process. The report further indicated that VW had little choice but to take on sourcing and production of batteries in order to meet required ambitious time-to-market needs and assure reliable supply. The report further indicates that the decisions had a political undertone in that European political leaders have become vocal about not letting East Asia dominate electric vehicle technology.

 

Huawei Fallout Continues Across High Tech Supply Networks

The continued fallout of U.S. actions to ban U.S. firms with doing business with China based Huawei Technologies, including component supply, continues to unfold.

Semiconductor supplier Broadcom warned this week of a $2 billion shortfall in revenues as a result of the U.S. ban. The semiconductor manufacturer indicated that made upwards of $900 million in sales to Huawei in its prior fiscal year. The $2 billion shortfall reportedly reflected not only directly to Huawei, but other expected industry fallout.  News of the shortfall caused a selloff of semiconductor related stock. Suppliers Qualcomm and Intel are also reconsidering revenue outlook in light of the supply ban related to the Chinese telecom provider.

Meanwhile, Huawei has now cancelled the scheduled launch of a new laptop and has reportedly temporarily halted personal computer production.  The company is also throttling back its stated goal of becoming the globe’s top seller of smartphones in the light of its existing dependence on U.S. based high technology suppliers. Asian based industry and media reports indicate that the China producer is aggressively seeking out alternative suppliers, and that independence from U.S. based supply chains has become an accelerated effort.

 

Added Note

Yes indeed, global developments and added risk continue to permeate across multi-industry supply and customer demand networks and the outlook remains continued uncertainty. Global supply chain networks require some basis of stability and equilibrium and that is obviously not the current state.