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INDUSTRY & TRADE

German carmaker VW scrambles to ‘duplicate’ Ukrainian factories

With the war in Ukraine halting deliveries of crucial car parts, Germany's Volkswagen and its suppliers are scrambling to find solutions abroad, while trying to reassure Ukrainians they aren't abandoning the country.

The main plant of German carmaker Volkswagen (VW) in Wolfsburg, Lower Saxony.
The main plant of German carmaker Volkswagen (VW) in Wolfsburg, Lower Saxony. Photo: Yann Schreiber / AFP)

Like other carmakers, German giant VW has had to trim production ever since Russia’s invasion last month forced many Ukrainian factories to close, holding up supplies of car components across Europe.

It is the latest upset to an industry already battered by two years of computer chip shortages and other pandemic-related supply chain disruptions.

“We are keeping our suppliers in Ukraine,” Murat Aksel, VW’s board member for purchasing, told reporters at the group’s Wolfsburg headquarters in
northern Germany.

But “we are currently creating capacities outside Ukraine because no one knows if the war will spread west or how long it will last.”

As well as manufacturing a range of car parts, Ukraine is one of Europe’s biggest suppliers of automotive wire harnesses.

A wiring harness groups together the maze of cables running through every car and is known as the vehicle’s central nervous system.

In Wolfsburg, housed in the VIP section of the Volkswagen Arena stadium, a 150-strong task force of VW experts and representatives from Ukraine’s auto parts industry is working feverishly to keep supply lines flowing.

READ ALSO: German industrial output rises but conflict darkens outlook

Solutions range from sourcing replacements for certain parts or switching suppliers where possible, to the radical option of creating “duplicates” of
entire factories.

The most likely destinations for these mirror sites are countries in eastern Europe or the Maghreb, where costs tend to be lower and where the companies can repurpose or expand existing factories.

Bunkers

Pointing at maps of Ukraine and Europe, Aksel said all 16 Ukrainian sites supplying VW with cables are only running at 30 to 40 percent of normal output.

And the situation is “volatile”, he added.

The logo of German carmaker Volkswagen (VW) is pictured on the main plant of the group in Wolfsburg, northern Germany.

The logo of German carmaker Volkswagen (VW) is pictured on the main plant of the group in Wolfsburg, northern Germany, on March 22nd, 2022. Photo: Yann Schreiber / AFP

One factory outside Kyiv has already been duplicated in Romania.

“If we put in place all our planned measures, we will be able to duplicate all of our Ukrainian production capacity” for wire harnesses, said Geng Wu, co-head of the task force.

In total, around 55,000 employees would have to be trained over the coming months and 90,000 square kilometres of factory space filled with the necessary machines and tools, some of which have months-long delivery times.

German firm Leoni, VW’s main supplier in Ukraine, has already relocated some production of wiring systems to an existing Tunisian plant, and additional capabilities are opening in Romania soon.

But Leoni insisted it had no intention of turning its back on Ukraine as the country tries to withstand Russia’s attacks.

The firm restarted some production in Ukraine on March 2nd “with extra security precautions,” said Leoni’s chief operations officer Ingo Spengler.

Old Soviet bunkers near two factories in the Lviv region have been refurbished to help keep workers safe.

The company resumed night shifts this week, bringing output back up to 70 percent of normal production, allowing VW to restart its Wolfsburg assembly lines sooner than expected.

“As long as the security situation allows, our suppliers will keep producing,” said Aksel, who visited Ukraine with Spengler earlier this month.

Without the Ukrainian sites staying operational, European car manufacturing plants would be in a “dramatic” situation, Wu added.

Lessons learned

Of course the effort and money poured into creating new capacities could be in vain if the situation in Ukraine unexpectedly improves. But VW believes it’s a financial risk worth taking.

“Not making cars at all costs the most,” Aksel said.

But he rejected the idea that duplication could be the industry’s answer to all its logistics woes.

Having a back-up supplier here or there can’t hurt, Aksel said.

But you “can’t duplicate the whole vehicle”.

Volkswagen plans to use the lessons learned from Ukraine to “better understand” the intricacies of its supply chains and minimise the risk of future upheaval.

“This was not our way of doing things in the past,” Aksel said. But only being in contact with direct suppliers is “no longer enough”.

To illustrate the need for early vigilance and attention to detail, he offered up a saying: “You have to be able to hear the grass growing.”

By Yann SCHREIBER

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UKRAINE

Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Ukraine won the Eurovision Song Contest Sunday with an infectious hip-hop folk melody, boosting spirits in the embattled nation fighting off a Russian invasion that has killed thousands and displaced millions of people.

Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Riding a huge wave of public support, Kalush Orchestra beat 24 competitors in the finale of the world’s biggest live music event with “Stefania”, a rap lullaby combining Ukrainian folk and modern hip-hop rhythms.

“Please help Ukraine and Mariupol! Help Azovstal right now,” implored frontman Oleh Psiuk in English from the stage after their performance was met by a cheering audience.

In the Ukrainian capital Kyiv, the triumph was met with smiles and visible relief.

“It’s a small ray of happiness. It’s very important now for us,” said Iryna Vorobey, a 35-year-old businesswoman, adding that the support from Europe was “incredible”.

Following the win, Psiuk — whose bubblegum-pink bucket hat has made him instantly recognisable — thanked everyone who voted for his country in the contest, which is watched by millions of viewers.

“The victory is very important for Ukraine, especially this year. Thank you from the bottom of our hearts. Glory to Ukraine,” Psiuk told journalists.

Music conquers Europe

The win provided a much-needed morale boost for the embattled nation in its third month of battling much-larger Russian forces.

Mahmood & BLANCO  performing for Italy at Eurovision 2022

Mahmood & BLANCO perform on behalf of Italy during the final of the Eurovision Song contest 2022 in Turin, Italy. (Photo by Marco BERTORELLO / AFP)

“Our courage impresses the world, our music conquers Europe!” he wrote on Facebook.

“This win is so very good for our mood,” Andriy Nemkovych, a 28 year-old project manager, told AFP in Kyiv.

The victory drew praise in unlikely corners, as the deputy chief of the NATO military alliance said it showed just how much public support ex-Soviet Ukraine has in fighting off Moscow.

“I would like to congratulate Ukraine for winning the Eurovision contest,” Mircea Geoana said as he arrived in Berlin for talks that will tackle the alliance’s expansion in the wake of the Kremlin’s war.

“And this is not something I’m making in a light way because we have seen yesterday the immense public support all over Europe and Australia for the bravery of” Ukraine, Geoana said.

British Prime Minister Boris Johnson called the win “a clear reflection of not just your talent, but of the unwavering support for your fight for freedom”.

And European Council President Charles Michel said he hoped next year’s contest “can be hosted in Kyiv in a free and united Ukraine”.

‘Ready to fight’
Despite the joyous theatrics that are a hallmark of the song contest, the war in Ukraine hung heavily over the festivities this year.
 
The European Broadcasting Union, which organises the event, banned Russia on February 25, the day after Moscow invaded its neighbour.
 
“Stefania”, written by Psiuk as a tribute to his mother before the war, mixes traditional Ukrainian folk music played on flute-like instruments with an invigorating hip-hop beat. The band donned richly embroidered ethnic garb
to perform their act.
 
 
Nostalgic lyrics such as “I’ll always find my way home even if all the roads are destroyed” resonated all the more as millions of Ukrainians have been displaced by war.

Kalush Orchestra received special authorisation from Ukraine’s government to attend Eurovision, since men of fighting age are prohibited from leaving the country, but that permit expires in two days.

Psiuk said he was not sure what awaited the band as war rages back home.

“Like every Ukrainian, we are ready to fight as much as we can and go until the end.

Britain’s ‘Space Man’

Ukraine beat a host of over-the-top acts at the kitschy, quirky annual musical event, including Norway’s Subwoolfer, who sang about bananas while dressed in yellow wolf masks, and Serbia’s Konstrakta, who questioned national healthcare while meticulously scrubbing her hands onstage.

Coming in second place was Britain with Sam Ryder’s “Space Man” and its stratospheric notes, followed by Spain with the reggaeton “SloMo” from Chanel.

After a quarter-century of being shut out from the top spot, Britain had hoped to have a winner in “Space Man” and its high notes belted by the affable, long-haired Ryder.

Britain had been ahead after votes were counted from the national juries, but a jaw-dropping 439 points awarded to Ukraine from the public pushed it to the top spot.

Eurovision’s winner is chosen by a cast of music industry professionals — and members of the public — from each country, with votes for one’s home nation not allowed.

Eurovision is a hit among fans not only for the music, but for the looks on display and this year was no exception. Lithuania’s Monika Liu generated as much social media buzz for her bowl cut hairdo as her sensual and elegant
“Sentimentai”.

Other offerings included Greece’s “Die Together” by Amanda Georgiadi Tenfjord and “Brividi” (Shivers), a duet from Italy’s Mahmood and Blanco.

Italy had hoped the gay-themed love song would bring it a second consecutive Eurovision win after last year’s “Zitti e Buoni” (Shut up and Behave) from high-octane glam rockers Maneskin.

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