Auto suppliers plan for uncertainty amid UAW strike, shift to EVs

DETROIT—Suppliers across the automotive supply chain are paying close attention to inventory, order volumes and capacity through immediate challenges like the UAW strike against auto makers and the long-term shift to EVs.

Resin supplier M. Holland Co. is watching its own and customers' inventories as the industry responds to the effects of the strike, Matthew Zessin, automotive market manager at M. Holland, told Plastics News in an interview during the North American International Auto Show in Detroit.

"Chemical manufacturing plants are not quick to turn off and not quick to start up," Zessin said.

Raw material suppliers are facing decisions to "turn the pipes off or keep them rolling based of their inventory," he said. "Trying to balance the timing of the strikes is difficult because nobody really knows what's going to happen … If all three (auto makers) come back at the same time, you're going to have huge constraints on the transportation pipeline."

"Given that all three (OEMs) are involved with the strike, one could sign a deal and then [the other two] could still be on strike," Michael Gumbko, automotive strategic account manager at M. Holland, told PN. "Any of our clients molding products for all three may be able to bring in some employees. But if they're heavier with the other two, they're still going to be struggling with production and cash flow."

"We're trying to balance how much material we're carrying," Zessin added. "We're telling our customers to not completely deplete their inventories."

Globally, material inventories are high and "available," he said, adding that the market isn't "consuming as much plastic right now as we had been over the last couple of years. There's more capacity coming online."

"(The industry) hasn't fully recovered from (events like) winter storm Uri in 2021," Zessin added. "Some of these molders are still struggling through some hard times. (Suppliers) are watching some customers."

As "cash has gotten a lot tighter for everybody," he said, suppliers need to be watching out for "all those things that you can't plan for … that could [make] a big ripple" through the industry.

"When the winter storms happened, everything was bottlenecked already from COVID, from people taking plants down and trying to deal with what the pandemic was going to be," Zessin said. "It just completely threw the entire plastics industry for a big loop."

"With interest rates where they are, no one is borrowing money," Gumbko said. "A long strike for suppliers that are already short on cash … with an elongated strike we could see some (molders) go bankrupt … or be acquired."

Although the UAW strike is having an immediate effect, Zessin said, it's unlikely to affect the industry's long-term shift to EVs.

While OEM build volumes have stayed flat or risen just slightly over the last year, demand for EVs "isn't high" and dealers have inventory for what demand there is, he said.

"I think the OEMs are pretty comfortable where they're at as it pertains to volumes," Zessin said. "They had a couple of good years and have been able to balance out their inventory. … I think they like the new model of ordering some vehicles online.

"The OEMs have been really trying to push their higher value vehicles over the last four months … to have that stock," he added. "There's more customization, especially with people buying more high-end vehicles."

EV demand is "just taking time" as the "new-to-everybody" battery technology is developed and advanced, Zessin said. "Like any technology, it's going to take a while to push through."

New technology development is "costly," he said. "You can't just make a quick switch."

Throughout those long development cycles, Zessin said, there's been increasing demand for plastic solutions.

"One of the biggest issues [in EV battery development] is containing fires," he said. "Plastic is a great resource for that."

"We are getting a lot of requests specific to EV technologies," Kim Zitny, director of corporate communications at Teijin Automotive Technologies, told Plastics News at the auto show.

"We're weeding through those to decide what makes the most sense for our business," such as programs with volumes that fit Teijin's available capacity, Zitny said.

Teijin is prioritizing customers with "programs that will lead into more programs," she said. "We're trying to get away from taking one-offs from customers and really form partnerships. A lot of times even with some of the startups, there's no opportunity there for that."

Although supply chain issues of the last few years have "seemed to stabilize," Zitny said, suppliers of metal or internal engine components may "see some consolidation. At some point, they're going to have to transition what they're doing."

For Teijin, the shift to EVs should be a "natural transition," she said.

"We do a lot of exterior body panels, pickup boxes. Everything we do is lightweight, so we inherently are a good fit from ICE to EV because the lighter the vehicle the more range you're going to get out of that battery," she said.

"We're working on, and actually have approved, some EV composite material that can contain thermal runaway, self-extinguish," Zitny said. "They're much safer than what a metal enclosure would be."