Coverage: BMW to halt production due to parts shortage

Car maker BMW extended its production halts in Germany to China and South Africa on Monday as the luxury-car manufacturer grapples with a shortage of steering parts.

Steven Arons of Bloomberg News had the news:

Production at the factories in Shenyang and Rosslyn is likely to stop for a day, while its plant in Leipzig, Germany, is expected to be partially shuttered, spokesman Michael Rebstock said. The Leipzig site has been closed since Friday, and another facility in Munich was affected last week as an unidentified Italian car-parts supplier has been unable to make the required deliveries, magazine Focus reported earlier Sunday.

BMW’s profitability dropped in the first quarter, as an aging production lineup led the company to offer incentives to accelerate sales. The Munich-based carmaker delivered 5.2 percent more cars in the first quarter than a year earlier, compared with a 16 percent jump at Mercedes, which last year outsold its luxury brand rival for the first time in a decade.

“We can’t say at this point when the production halts will be over,” Rebstock said, adding that the company would decide on further production stoppages caused by the supply shortage as needed. He described the likely financial damage as “manageable” but “not yet quantifiable,” noting that the company’s 1-Series through 4-Series models are all affected.

“A task force is working constantly to solve the issue,” Rebstock said.

Patrick McGee of The Financial Times reported that BMW was unable to build thousands of cars last week:

Disruptions can, therefore, have immediate impact. In this case, the supply shortage has already affected production in Leipzig and Munich in Germany, as well as Rosslyn, South Africa, and Shenyang, China.

“A missing part — even if only a small one, as in this case — can have a major impact,” said Markus Duesmann, BMW board member overseeing purchasing and supplies.

He said “only limited production” of BMW 1-, 2-, 3- and 4-Series cars is possible and that BMW expects Bosch to compensate for damages.

Up to 17,500 such units are built each week, according to Christian Ludwig, analyst at Bankhaus Lampe in Düsseldorf.

“If these figures cannot be made up for during the quarter the sales impact would be €400-€500m per week,” he said. The impact on earnings, on an operating margin of 9 per cent, would be to €45m.

Marc-René Tonn, analyst at Warburg Research in Hamburg, estimated that a week of no production for 1-4 Series cars would reduce revenues by about €550m, plus any losses incurred at BMW’s joint venture in China.

Edward Taylor of Reuters reported that some plants moved up planned closings:

BMW plants in Tiexi, China and Rosslyn, South Africa have extended or pulled forward planned interruptions to production, the carmaker said.

“We are taking advantage of the flexibility of our processes to minimize economic damage. We expect that Bosch, as the responsible supplier, will compensate for damages,” BMW said.

Bosch meanwhile blamed the problem on a sub-supplier in Italy, which it did not name.

“One main component of the steering system is the housing; which Bosch procures from a sub-supplier in Italy. We are currently experiencing delivery problems with this supplier,” it said in an e-mailed statement.

It said Bosch, BMW and the sub-supplier were doing all they could to resolve the delivery bottlenecks.