Volkswagen idles two German plants as supplies from Ukraine run dry

Volkswagen has been forced to idle two of its German plants after failing to obtain key parts from Ukraine, in the clearest sign yet that Russia’s invasion of its neighbor is disrupting the European car industry’s supply chains.

The carmaker’s Zwickau plant in east Germany will be idle for four days from next week, and the nearby Dresden plant will be closed for three days, a spokesman confirmed, adding it was impossible to say how long the shutdowns would last.

VW has been unable to secure electrical wires from manufacturers in Ukraine, according to people familiar with the matter, and realized late on Thursday that it would have to cut back production. VW declined to name the supplier.

The closures will lead to roughly 1,200 fewer cars being produced every day, and will particularly affect the manufacturing of VW’s electric ID models, made in Zwickau. Demand for the vehicles has been so high that VW’s own staff have been asked to drive petrol models for the moment to increase the available supply of battery-powered vehicles.

Earlier on Friday, Volkswagen chief executive Herbert Diess said it was “too early to assess the impact” of the war in Ukraine on VW’s business. VW had already offered to fly Ukraine-based staff out of the country a few weeks ago, he added.

Rival German carmaker Mercedes-Benz said it did not yet know if it would face the same interruption of supplies from Ukraine. “We are monitoring the situation closely, but it is still too early to assess the impact of this escalation on our business,” it said in a statement. General Motors told the FT on Thursday it had “limited supply chain exposure” to Ukraine.

Although Russia and Ukraine are small markets for Volkswagen, which sold 9m cars globally in 2020, both countries provide raw materials and components that are crucial to the industry’s supply chain. One large auto manufacturer told the Financial Times its employees were trying to work out whether rail deliveries that come via Russia would be disrupted.

The temporary closure of VW’s factories echoes a similar move taken by the carmaker towards the end of 2020, caused by a shortage of semiconductors. The bottlenecks soon escalated into a serious crisis, leading to millions fewer vehicles being produced across the industry in 2021. Shifts at some VW plants are still canceled because of a lack of chips.

Additional reporting by Steff Chávez in Chicago

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