As the Detroit 3 return to auto production after the COVID-19 pandemic interruption, their suppliers still are grappling with a myriad of roadblocks.
Restart delays among parts plants in Mexico, compounded by liquidity issues for lower-tier manufacturers, are roiling the supply chain as General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles N.V. prepare to reopen most of their North American vehicle plants on May 18.
Auto makers last week touted their protocols for health and safety, saying they are now confident to restart this week after being shuttered over global coronavirus fears.
Earlier hopes of restarting this month went nowhere. But the Detroit 3 now appear to be all systems go to relaunch auto making in a COVID-19 new normal.
"We have had a variety of opportunities to learn about what makes for a safe operating environment," Barry Engle, president of GM North America, told Automotive News.
"We believe that we have the procedures in place to ensure the safety of our people as they arrive for work, while they're there with us and as they leave the facility."
But Ford COO Jim Farley told analysts that while the new factory protocols are critical to the ramp-up, much still depends on the supply base.
"All of our production manufacturing operations rely on healthy suppliers, and their ability to start up is really critical," Farley said.
Got cash?
But the new pressure on suppliers is exposing pain points. Chief among them: having enough cash to relaunch production lines.
"The financial liquidity of the industry is severely hampered right now," Julie Fream, CEO of the Original Equipment Suppliers Association trade group, said during an Automotive News "Congress Conversations" webcast.
"Some suppliers, particularly the Tier 2s and Tier 3s we're hearing from, are really starting to have some difficulty."
Fream has been advocating alongside Michigan government leaders for federal aid for suppliers. Members of the Michigan congressional delegation last week appealed to U.S. Treasury Secretary Steven Mnuchin to provide financial assistance to auto suppliers, especially lower down the supply chain.
"We see just over 20 percent (of suppliers) having less than eight weeks of liquidity—meaning if the industry were not to run at all for eight weeks, they would be in dire straits," Fream added. "It is a difficult time, and it's all the more reason why we as an industry have to get started again."
Mexico problems
Mexico's supply base is presenting another threat to North American factories, with mixed signals coming from government officials there. Mexico is a large source of components and materials for U.S. vehicle assembly.
On May 13, Mexico's federal government indicated the auto sector would reopen on May 18, and published guidance on how to proceed. But on May 14, it published new instructions indicating the industry could not reopen until June 1.
But the government reversed that stance on May 15, saying that Mexico's industry can begin operating before June 1, provided companies have completed the process of establishing safety protocols.
Indeed, last week, Bloomberg reported that Daimler has been forced to stop vehicle production at its U.S. plant in Vance, Ala., because it cannot get adequate parts from Mexico. The Alabama plant was the first U.S. production line to resume operations during the pandemic.
"I have a feeling that the Mexico issue is not entirely beyond us yet," said Dietmar Ostermann, U.S. automotive advisory leader at PwC, during last week's Automotive News webcast.
"I know that, certainly, the larger Mexican suppliers and the facilities of larger U.S. and European and Japanese suppliers in Mexico will implement the same safety standards. But I am very doubtful that smaller Mexican supply plants and Tier 2 supply plants will have the safety processes ... and testing capabilities in place."