BMW May Halt Output as Volcano Ash Disrupts Supplies

[reak6ion]

April 19 (Bloomberg) -- Bayerische Motoren Werke AG may halt auto production if the world’s largest maker of luxury vehicles is unable to redirect the flow of supplies disrupted by a volcanic ash cloud over Europe.

BMW is looking for alternatives to air cargo for transmissions and other components to supply its factories, including its plant in Spartanburg, South Carolina, Mathias Schmidt, a spokesman for the Munich-based carmaker, said today in a telephone interview.

While no decisions have been made, assembly lines could come to a stop “in the worst case” if logistics disruptions persist for more than another two days, he said. Volkswagen AG, Europe’s largest carmaker, said it could also face production disruptions if European airspace remains closed.

As many as 81,000 flights have been canceled after the April 14 eruption of Iceland’s Eyjafjallajökull volcano spewed dust across Europe’s airspace, causing airports from Dublin to Moscow to shut down. The disruptions are costing carriers as much as $300 million in lost revenue a day, according to an estimate by the International Air Transport Association.

“The same issues are likely to affect all manufacturers,” said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt. “They should be able to make up any lost production once deliveries restart,” said Pieper, who recommends buying BMW shares.

Volkswagen, which also makes Audi and Skoda cars as well as Scania trucks, “can’t rule out” that persistent flight restrictions could cause factories to run out of parts, Michael Brendel, a spokesman for the Wolfsburg, Germany-based company said today by telephone, declining to provide a timeframe for potential closures. “At the moment, there are no constraints.”

Daimler AG, the Stuttgart, Germany-based maker of Mercedes- Benz cars and trucks, doesn’t anticipate any disruptions beyond delays faced by employees on business travel, spokeswoman Ute von Vellberg said.

Share Performance

BMW fell 0.7 percent to 35.31 euros in Frankfurt trading. Daimler, which operates a factory in Alabama, declined 0.6 percent to 36.31 euros. Volkswagen, which operates more than 60 factories around the world, fell 1 percent to 71.41 euros.

BMW produces about 600 vehicles a day at its sole U.S. factory, which opened in 1994, according to its Web site. The company also canceled a press trip to visit a factory in Shenyang, China, because of the air-travel restrictions. BMW officials and journalists were due to depart for China today

The U.S. was BMW’s second-biggest market after Germany in terms of vehicles sold in the first quarter. Deliveries to U.S. customers rose 7.4 percent to 55,051 cars and SUVs in the first three months of 2010, according to company data

Source: bloomberg.com

[SSense]

Most probably the flights are going to resume from tomorrow onwards, i have two passengers flying to BHX and their flight is scheduled for tomorrow, no cancellations until now.. If worse comes to worse, this volcanic clouds can last upto a month, imagine the loss the airline industry will face if anything like that happens.. *God forbid*

On anoter note, they can still resume shipping their production parts through sea transport, most of their production steps are within Europe's boundaries..

[Wazif]

ouch!!!... hope this ash cloud disperses soon!...sure is causing a lot of pain

[reak6ion]

A latest report by Reuters indicates that the BMW has slowed its U.S. production at Spartanburg, SC, plant due to the flight restrictions in Europe caused by the ash from the volcanic eruption in Iceland which affected the deliveries of transmissions.

The South Carolina-based plant produces about 600 X5 and X6 vehicles per day and the total units exported accounts for 70 percent.

According to Reuters and quoting Bobby Hitt, spokesman for BMW plant in Spartanburg, due to recent strong demand, lead times in Europe on transmissions have shortened and BMW over the last few weeks has had them flown to the United States instead of shipped by boat to keep up schedules.

On Monday, BMW told workers it would slow production while maintaining its normal shift schedule and take “extraordinary measures” to ship transmissions to southern Europe for flights to the U.S. to maintain production, Hitt said.

From Monday through Thursday, BMW normally runs two 10-hour shifts at the Spartanburg plant and one shift on Friday.

65 percent of the parts assembled at the Spartanburg plant are sourced from North America, with the other 35 percent of the value coming mainly from engines and transmissions shipped from Europe by boat.

Source: bmwblog.com