June 17, 2021

Gp Delivers

The excellent automotive artisans

BMW, Mercedes keep U.S. plants supplied and producing

The semiconductor shortage that has been undermining worldwide auto production has spared the U.S. operations of two luxury manufacturers so far — the critical Southern assembly plants of Mercedes-Benz and BMW.

Both operations say they have not been pinched by the chip shortages that have been halting production at companies including Stellantis, Volvo and Honda in recent weeks.

Some analysts believe BMW and Mercedes-Benz are shielding their U.S. plants from the industrywide problem. The analysts say that is because the luxury makers’ U.S. plants are simply too important to their well-being.

“They can’t fail,” Joe McCabe, CEO of AutoForecast Solutions, told Automotive News. The two plants are “too important for the global portfolio of those two brands.”

The two manufacturers have not said much to date about their outlooks on the microchip situation. But their crossover-focused factories are key weapons as the brands fight to lead the luxury segment in the U.S. market.

BMW’s Greer, S.C., factory builds all of the brand’s X7 large crossovers and 97 percent of its midsize crossovers, according to AutoForecast data.

The Mercedes plant in Vance, Ala., accounts for 94 percent of global production of the GLE midsize crossover and more than 87 percent of GLS SUV production.

“There’s a lot of competition in the mid- and large-crossover segments in North America,” McCabe said. “Brands are trying to move themselves up the value chain to take on BMW and Mercedes.”

But there’s another incentive for Daimler and BMW to keep the lines moving at the U.S. factories — profit margins.

“When it comes to managing sourcing decisions at a time of global production constraints, high-profit vehicle lines like midsize SUVs and trucks are favored versus other products, particularly sedans,” said Tyson Jominy, vice president of the Power Information Network at J.D. Power.

The semiconductor supply problems, along with other parts shortages, claim new victims each week. Supply complications have stopped or slowed vehicle assembly at Ford, General Motors, Toyota, Honda, Nissan, Subaru and Volvo since the year began.

In addition, last week, a Reuters report from Seoul said that Hyundai Motor Co. — which has also been able to avoid chip-related production problems so far — could now face production cuts.

Daimler has not been immune to the crisis.