Dive Brief:
- Daimler is suspending production at its Mercedes-Benz factory in Tuscaloosa County, Alabama as a result of issues with sourcing, a company spokesperson confirmed to Supply Chain Dive.
- "Due to respective country-specific regulations in Mexico and their impact on supplier sites, we are facing temporary interruptions," a Daimler spokesperson said. The factory had reopened on April 27 after shuttering on March 23 as a result of the coronavirus pandemic. Daimler plans to run the factory through a previously planned summer shutdown to make up for the disruptions.
- The Mexican president and the health ministry have issued conflicting timelines for allowing automotive suppliers to reopen. The latest from the health ministry targets June 1. General Motors is waiting for final safety rules to be published Monday, but plans to restart one of its facilities in Mexico on Wednesday with "adequate safety measures," according to Reuters.
Dive Insight:
Daimler CEO Ola Källenius expressed confidence in the company's supply base on a call with analysts last month.
"Contrary to some of the things that you have perhaps read, the supply chains, in our case, have been remarkably robust," Källenius said. "So I don't want to be overly confident in terms of market rebound, but if and when it comes, we're ready to go."
The Mexican automotive supplier base has been a big question mark when it comes to the sector's ability to restart operations in the coming days.
"I want to emphasize that Mexico has me concerned, just as an economy," Cummins COO Tony Satterthwaite said during an event last month. "Because their COVID lockdown has been one of the most heavy-handed."
Executives from Detroit automakers General Motors, Ford and Fiat Chrysler highlighted work with their supplier base when talking about reopening on earnings calls last month.
Production restarts in China highlighted the need "to make sure your supply base is ready," Ford COO Jim Farley said. "So, we've surveyed almost 1500 suppliers in Western Europe and the US to make sure they're ready to come up and have the same playbook in terms of prioritization of safety."
Ford restarted U.S. operations on Monday with "robust safety and care measures globally," the company announced.
General Motors CEO Mary Barra highlighted factory safety efforts and communication with local governments when an analyst asked about Mexican supplier issues earlier this month.
"So the conversation has been constructive, and that’s what informs our current plan on 5/18," Barra said, referring to the company's plan to restart most of its U.S. and Canadian production this week.
The suspension of operations at Daimler's plant in Alabama highlights just how lean automotive supply chains run. The just-in-time inventory model doesn't leave a lot of inventory in these factories, so if suppliers aren't running then factories can't stay open for long.
"The U.S. car assembly plants have some inventory but not enough to last more than two weeks," Patrick Penfield, a supply chain management professor who teaches at Syracuse University in New York, told the Detroit Free Press.
