Daimler: Switch to EV could jeopardize supplier network

Daimler: Switch to EV could jeopardize supplier network

by Byron Hurd

Electrification may result in bailouts, Daimler says.

An accelerated push to electrification could strand its supplier network, Daimler said in its annual report, citing concerns that its chain was developed with a diesel future in mind.

The company's concern is that its suppliers are being strained by unanticipated costs associated with developing a larger portion of electrification components than anticipated whilst maintaining their production of diesel and gasoline vehicle parts.

"Due to the planned electrification of new model series and a shift in customer demand from diesel to gasoline engines, the Mercedes-Benz Cars segment in particular is faced with the risk that Daimler will require changed volumes of components from suppliers," Daimler said.

Such unanticipated production schedules could essentially put supply chain production capacity out of balance, putting workers in under-utilized lines out of work temporarily (at minimum) and putting increased pressure on others to deliver beyond expected capacity, Reuters reports.

The wire service also previously reported that Daimler is expecting downward pressure on its profits due to these unanticipated shifts in future production.

"Necessary capacity expansion at suppliers' plants could also require cost-effective participation." In other words, Daimler may have to front additional costs for idled production and shifted workloads, essentially propping up suppliers who were not told to expect such production schedules.

Daimler's full 2017 annual report is here.

Photo by Ronan Glon.