Volkswagen Stops Passat Production

Last Friday, production of the Volkswagen Passat was stopped in Emden, Germany. Not because there aren’t enough customers for the car. There are too many.

Lines were stopped, and both shifts were sent home. 1,000 Passats remained unmade that day. The reason: Missing parts. The surging demand for automobiles worldwide leads to capacity constraints at suppliers. Many had closed their doors during carmageddon, the surviving ones had cut down on capacities. Now they are swamped.

The local paper Emder Zeitung says a supplier had problems with cockpit parts. Not an isolated occurrence. A week ago, Dr. Jürgen Geissinger, VP of the German industry organization Verband der Autoindustrie (VDA) reported “shortages from raw materials all the way to electronic components.”

Over in the UK, GM’s Vauxhall grouches that they can’t find enough British parts. The Society of Motor Manufacturers and Traders sees shortages everywhere: The industry is running out of “alloy wheels, alternators and starter motors, brake components, castings and forgings, fasteners, nuts and bolts, plastic mouldings in general, large stampings, sheet steel and aluminium, transmission components and wiring harnesses.” Sounds like the only item that is available in quantity are wiper blades.

Back in Emden, VW spokesman Georg Göricke promised to Das Autohaus that normal Passat production will resume Monday, and that the missing 1,000 units will be built before the year is over.

Just-in-time is great. As long as the parts arrive just-in-time. Stock levels are depleted. The only stocks that are up: Those of the formerly down and out parts suppliers. Morningstar says that “auto-parts stocks have been one of the best-performing industries in 2010, with such prominent names as Magna International, BorgWarner, and TRW all up more than 75 percent for the year to date.”