Tag: Magna

OM in the News: America Now Has an EV Rust Belt

At first, North America’s biggest auto-parts supplier was thrilled to snag the job of making enclosures for the batteries in GM’ new electric pickup. The contract was so big—and promised to be for years to come—that Magna International built a new  $575 million factory in a Michigan cornfield. And Michigan even offered a $44 million incentive package to draw the promise of new jobs–a topic in Chapter 8.

Five years later, that million-square-foot plant is mostly empty and losing money, a casualty of America’s messy breakup with EVs, reports The Wall Street Journal (April 1, 2026). It is one of dozens of now desolate EV parts plants across the country. It can take years to pivot a factory and supply chain from one type of vehicle to another. And it would take 4-6 months of higher gas prices for most Americans to reconsider more fuel-efficient vehicles– an unlikely prospect. Detroit automakers have scrapped their boldest EV dreams—and are looking beyond $50 billion in charges tied to broken supplier contracts and wasted investments.

The deserted Magna factory in St. Clair was expected to stay busy for years.

Magna, which has more than 300 factories around the globe and parts in nearly every car on the road today, has been left holding the keys to the St. Clair, Michigan  building that is bigger than 20 football fields. The Canadian company needs to find a second life for the factory and the hulking rows of assembly-line robots. A few years ago, Magna had plans to build an entirely new business unit around EV battery enclosures.

The EV slide is reverberating through the automotive industry’s sprawling supply chain. Multinational companies such as Magna, Dana and BorgWarner slashed jobs and closed plants due to the EV pullback, while a string of smaller manufacturers shut down altogether. Last year, more than $20 billion in previously announced investments in EV and battery facilities were wiped out.

Smaller suppliers have little recourse to recoup costs when automakers cancel a vehicle program and stop buying parts. They typically absorb the upfront cost of setting up an assembly line with the expectation of recouping it over time as parts are shipped. GM’s supplier contracts were struck with the expectation that GM would be building one million EVs a year. By December, 2025 the company was selling around 8,000 a month.

Classroom discussion questions:

  1. Discuss the typical incentives offered to attract a new plant.
  2. Why has the EV trucking business been especially hard hit?

 

 

OM in the News: Increased Efficiency From JIT Comes at a Price

Just as the recovery in US auto sales begins to accelerate, a fire last week at Magna International, a major auto parts manufacturer near Detroit, put a huge scare into  five automakers. Two of them, GM and Mazda, had to close plants and stop making some models. Three others, Ford, Chrysler, and Nissan,  faced the prospect of having to do without critical parts from their only supplier of ceilings, consoles, and other parts.

Yesterday’s Portland Press Herald (March 7,2011) writes: “The impact of the blaze shows how years of work to make auto plants more efficient can fall apart when something interrupts the flow of parts in an intricate supply chain”.  As we discuss in Chapter 16, JIT has proven a wonderful system for 3 decades in the auto industry. Auto companies have cut costs and become more efficient by going to a JIT parts delivery system to avoid paying for huge stockpiles of parts.

But to avoid buying costly machinery, parts firms often make a particular part at only one site. As a result, plants have few parts in storage and are so dependent on every link in the supply chain that the whole system falls apart, as it did in this case, if production is interrupted at a single factory. These days most auto parts are “single-sourced”.

The story for Magna and its customers fortunately (and luckily) had a happy ending today. The company was able to work with its customers to get enough of the equipment up and running to allow auto plants to receive  at least a portion of their needed parts. Our Ch.16 case study, “JIT After a Catastrophe” deals with how Caterpillar faced a very similar disaster when a tornado destroyed its Mississippi couplings plant in 2008.

Discussion questions:

1. How should the auto makers react at this point?

2. What should Magna do in planning for the future?