We talking about Russia and Ukraine?

Black Ambrosia

Well-Known Member
Not currently, though he had several affairs. His weakness, however, involves young boys. This revelation led to the murder of Alexander Litvinenko who was poisoned whilst in London from a sushi restaurant.
Is this a real weakness or a presumed one? I’m sure his kids are in sky high towers like rapunzel.
 

Black Ambrosia

Well-Known Member

Russian invasion to hit US consumers, automakers already stretched by chip shortage


The Russian invasion of Ukraine will hit U.S. consumers directly in their wallets and add to the headwinds that the automotive industry has faced for the last two years.

New vehicle prices will be pressed upward again at a time when they are already high because of supply chain issues and disruptions, such as the global semiconductor shortage.

Raw material costs, inflation, and of course, gas prices are headed north.

For the industry and consumers, the real question is, how high?

“Gas prices are going higher, for longer than drivers have seen in a generation,” said Erik Gordon, a business professor at the University of Michigan. “Huge SUVs will be for presidents, gangsters and oligarchs. Fuel efficiency, whatever the fuel, will be a bigger selling point.”

Supply and demand means higher prices at the pump. Experts say to expect $4 a gallon for most of the United States by early spring, according to a USA Today report. Russia, as a major oil producer, can also affect global supply.

But the bigger takeaway is that the invasion will cause a hike in inflation, forcing many consumers to delay buying a new vehicle or to buy a “modest vehicle,” Gordon said.

If consumers slow their big truck and SUV purchases, that would also affect the bottom line for automakers, particularly the Detroit Three, which rely heavily on the profits from sales of those vehicles. In recent years, the domestic auto industry has focused increasingly on production of trucks and SUVs over sedans, assuming that a consumer shift in preference away from smaller, typically more fuel-efficient cars was permanent. Electric vehicles are growing their share of the market, but they remain a small piece of it.

Steve Melnyk, business professor at Michigan State University, said war also increases uncertainty, which means that interest rates will go up and stock prices will go down.
“In other words, the cost of borrowing money to buy that new, more expensive car can be expected to go up,” Melnyk said. “Expect car prices to go up as the makers work to pass the costs onto the consumer.”

The effects of war on global economic activity are likely to be widespread, said Joe Eisenhauer, dean of the College of Business Administration at the University of Detroit Mercy, and the consequences will be exponentially more damaging the longer it continues.

"A war is going to create scarcity, and it's going to drive up demand, both of which (will) lead to inflation," he said.

Germany shifting its natural gas purchases from Russia to other sources; Russia and Ukraine using more energy to support their militaries, and European companies that would normally source auto parts from Russia but would instead look to Japanese or American companies for those items are examples of how changes in one area can affect others.

"As a consequence, there will be upward pressure all over the world, including in the United States. That could mean higher prices, not only for oil and gas, but it could also change the dynamics of our auto market here," Eisenhauer said, noting that consumers might, for instance, seek out more electric vehicles.

AutoForecast Solutions CEO Joe McCabe said Russia’s invasion of Ukraine is the next major world disruption to create a ripple effect across global automotive production.

“Just look how COVID, the semiconductor shortage, and even recent protests in Canada have impacted the market,” McCabe said.

The COVID-19 pandemic caused an eight-week shutdown of car production in North America. And just when automakers were working to catch up on that lost production, the world was hit with a shortage of semiconductor chips used in a variety of car parts. That has crimped new vehicle production across the industry for a year now, creating inventory shortages and high new-vehicle prices.

Then there were the protests on the Ambassador Bridge recently that prevented parts from getting over the U.S.-Canada border, disrupting production at the Detroit Three and others.

“Russia is a large supplier of key raw materials and rare earth metals supporting the global automotive community,” McCabe said. “As sanctions are put in place, expect to see a constraint on supply and increased prices as the industry will be forced to rely on other sources.”

Each time a world event such as this happens, McCabe said, carmakers must either absorb the cost of it or pass it on to the consumer.

“But eating the cost usually means having the supply chain consuming most of the pain,” McCabe said.

Ukraine doesn’t have any significant automotive assembly, McCabe said. But Russia builds about 1.5 million cars per year; with more than half of that coming from globally integrated automakers such as Renault-Nissan-Mitsubishi, Hyundai and Volkswagen. Chrysler-parent Stellantis also makes vehicles in Russia.

“Any sanctions will cause ... reductions in production, which will slow the need for parts, which will impact the supply chain, and so on,” McCabe said.

Stellantis has a factory, of which it shares ownership with Mitsubishi, in Kaluga, Russia, southwest of Moscow. The company announced in January that it would begin exporting Russian-made commercial vehicles to other parts of Europe this month. In that announcement, the company, which also owns the Jeep, Ram, Dodge and Fiat brands, noted that the production of vehicles from its Peugeot, Citroen and Opel brands there had doubled last year compared with 2020.

Stellantis spokeswoman Shawn Morgan, who is based out of the company’s Auburn Hills office, said the automaker is “monitoring the situation.”

Lilia Mokroussova, a Stellantis spokesperson for the region that includes Russia, said in an email Thursday that production at the plant "is running in a normal mode."

Stellantis annually sells more than 18,500 vehicles in Russia and almost 14,000 vehicles in Ukraine, Mokroussova said.

One of the biggest unknowns at this point is how significant the impact of sanctions might be for individual automakers.

For the Detroit Three, the limited scale of production in Russia will be a key factor.

General Motors ended production in Russia in recent years, and Ford has mostly gotten out, although Automotive News noted that the company “continues to assemble vans with a Russian partner, Sollers, in Elabuga.”

Reuters pointed to a previous round of sanctions as a catalyst for some of those changes.

“Russia’s car market was among Europe’s top performers before the imposition of western sanctions in 2014 which, coupled with falling oil prices, sharply weakened the (ruble), increased the cost of buying a car and curbed Russians’ ability to buy new vehicles. As a result, foreign carmakers started to rethink their strategies of doing business in Russia,” the news service reported in a 2019 story on GM pulling out of its joint venture to produce Chevrolets there.

Mark Gillies, a Volkswagen spokesman, said in a statement that the automaker has taken note of the attack “with great concern and dismay” and that the company hopes for a quick end of hostilities and a return to diplomacy.

“We are convinced that a sustainable solution to the conflict can only take place on the basis of international law. The degree of impact on our business activities in the affected countries is continuously determined by a task force. In all activities on-site, the safety and integrity of our employees is our top priority,” Gillies said in an email.

Rie Yamane, a Renault spokesperson, said in an email that "at this stage, we are following the ongoing (situation) very carefully."

Ford spokesman Ian Thibodeau said in a message that "We’re deeply concerned about the situation in the Ukraine and the safety and well-being of people there and throughout the region. We’re following and will manage any effects on our business in real time. However, our primary interest is in the safety and well-being of people in the Ukraine and throughout the region.”

Steve Carlisle, General Motors’ president of North America, said the automaker is looking at the impact of Russia’s invasion of Ukraine “closely.”

“From raw materials, we do have some exposure,” Carlisle said during CITI’s 2022 Global Industrial Tech and Mobility conference Thursday. “In terms of selling into the local market, we have a small presence in Russia, but nothing material.”

Carlisle said the industry will have to watch for any larger economic fallout from the invasion but, “In terms of direct impact, I’d say our exposure is pretty limited.”

Sam Abuelsamid, principal analyst for Guidehouse Insights, said the direct impacts to the industry in the United States probably won’t be huge, but secondary effects, including to the broader economy, will be ones to watch.

He said he expects the impact to be significantly more pronounced in Europe, which must contend with disruptions to energy supplies as Russia is a major supplier. The real danger, he said, hinges on the eventual scale and longevity of the situation.

“If this goes on for a long time and goes potentially beyond the borders of Ukraine, then things could get a little more hairy,” Abuelsamid said.

Raw materials will be something to watch as well, he said.

Russia is a major producer of palladium, which is used in catalytic converters, although other countries, including South Africa and the United States, are also producers, he said. News reports on Thursday showed that palladium prices had already spiked.

Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said Russia is also a large supplier of platinum, nickel and magnesium, which are all important to the automotive industry.

“Fortunately, there are alternative sources of these materials. However the current situation has only added to their recent price inflation on the global market,” Fiorani said.

While Fiorani said he expects the impact on Stellantis and the other members of the Detroit Three to be limited, he said the story is different for the Renault-Nissan-Mitsubishi Alliance, which builds the largest share of vehicles in Russia.

“An interruption in the assembly of these vehicles will impact suppliers in France, Germany and Japan for the Renault and Nissan products,” Fiorani said, noting that suppliers of parts for Hyundai and Kia models will also be affected by any trade problems with Russia.

Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor, also pointed to Russia’s control over many raw materials and precious metals as a key worry.

Most concerning, she said, is that Russia supplies 75% of the neon gas used for lasers that make semiconductor chips.

“So should the U.S. put sanctions on some of those materials that could cause supply chain issues,” Bailo said. “We’ll have to see how that unfolds, but it’s another supply chain issue we have to keep an eye on.”

Melnyk, the MSU business professor, said the Detroit Three should be especially concerned given that Russia is one of the world's largest suppliers of the raw materials mentioned previously as well as aluminum.

“Aluminum is used by Ford for one of its prize jewels, the F-150 truck,” Melnyk said. “Nickel is a key ingredient in lithium-ion batteries, central to electric cars."

Melnyk said these issues and others would compound the problems being experienced by automakers as they apply to chips.

"I see these problems adversely affect the future rollout of products such as the Maverick by Ford,” Melnyk said.

TLDR - The price of gas and raw materials will go up. Uncertainty will cause stock prices to decline and interest rates to go up. Inflation will also be a problem. The impact will be felt more in Europe as they rely on Russia more than we do. Also, Russia provides metal for the auto industry and 75% of the neon gas used to make semiconductor chips so the chip shortage will be exacerbated again.
 
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