Volkswagen’s output into question as Ukrainian wire harnesses become biggest supply chain issue
Volkswagen’s output for 2022 could be in danger as a shortage of Ukrainian wire harnesses became the group’s biggest supply chain issues, chief executive Herbert Diess said.
“The war in Ukraine has put our existing outlook into question,” Diess said yesterday morning during a press conference. He added that commodity markets are expected to remain volatile until 2026 because of the ongoing invasion of Ukraine.
According to the chief executive, a halt in the supply of wire harnesses – which are unique to each model – could force the world’s second largest automotive maker to lower expectations if a solution is not found in the next three to four weeks.
Before the war’s outbreak, Volkswagen’s main issue had been the covid-induced shortages of semiconductors, which the company expected to remain until the second half of this year.
“We must continue to fight for every part,” Murat Aksel, Volkswagen’s board member and head of procurement, told German car magazine Automobilwoche in early February.
As a result of the shortage not only was the group forced to lower its production targets for 2021 from 9.3 million to 9 million but it lowered its forecast for 2022 to 8 million vehicles.
To avoid halting production altogether, Volkswagen relocated its production plants from Ukraine to North Africa and Eastern Europe, but a war-induced increase in raw material costs will drive prices up for both electric and fuel vehicles.
Despite instability rising in Europe, Diess said Volkwagen remained optimistic about 2022 as it had become more resilient because of the Covid-pandemic and the consequent supply chain issues.
After cutting overhead costs, the group reported €4bn of benefits compared with 2019 levels. In its 2021 results published on Friday, Volkswagen posted an operating profit of around €20bn due to higher prices. The automotive company also forecast deliveries will increase between 5 and 10 per cent, while revenues will go up by 8 and 13 per cent.