Slovenia’s floods cause car supply chain problems across Europe

13 September 2023

Severe flooding in Slovenia last month is now having a significant knock-on effect on the European automotive industry, as manufacturers of common components have been forced to temporarily halt production.

Factories in Slovenia’s neighbouring countries have reported hits to production levels because parts they rely on cannot be supplied.

Volkswagen, the German automaker, said it has been forced to temporarily close its Autoeuropa plant in Setubal, Portugal, due to the floods.

The plant, which makes the T-Roc crossover, will be closed between 11 September and 12 November, largely due to the significant disruption to Slovenian engine components supplier, KLS Ljubno.

KLS Ljubno, is a key supplier of toothed rings, supplying more than 80% of the automotive market in Europe.

At present, no European car is manufactured which does not incorporate at least one component originating from Slovenia – where the automotive sector comprises 20% of Slovenia's total exports and contributes 10% to the country's GDP.

KLS Ljubno CEO, Mirko Strasek, said: “We are still cleaning the factory, and it won't end soon.

“First we had to clean the mud and debris that was brought by the flood. We are focused on the machines and technological equipment, which we are gradually trying to bring to life. But since these are all electronics and digitised, these sensitive instruments and electronic devices will have to be replaced with new ones.”

Commenting on the situation, a VW spokesperson said: “All departments of VW AG are working intensively to keep the possible effects to a minimum. However, in the course of September it is to be expected that not all component and vehicle plants will be able to be adequately supplied, so production losses are to be expected.”

VW confirmed that due to the Slovenian devastation, shifts in other factories in Portugal may also have to be cancelled, or have short-time work periods in place.

Meanwhile, Skoda, which is also owned by VW, has seen production halt at its Kvasiny plant this week, also the result of a shortage of parts.

A Skoda representative said: "Due to a disruption in the provision of components across the Volkswagen Group's supply chain, Skoda Auto will also face shortages in the upcoming period."

Reports have suggested that the ripple effect from the floods – which saw flash flooding affect two-thirds of the country – will continue to affect carmakers across Europe for at least the next few months, with production at KLS Ljubno not expected to get up and running again until at least mid-October.

Other Slovenian suppliers affected include Tovarna Akumulatorskih Baterij (TAB) – which supplies batteries for the likes of VW, Volvo and Daimler. It has completely halted production, and does not expect to resume to full capacity for another two to three months.

Commentators have claimed the severe flooding highlights the vulnerability of global supply chains, particularly those that are highly interconnected, such as car manufacturing. KLS Ljubno alone has a 17% market share of the parts it supplies.

Slovenia’s economy minister, Matjaž Han, has promised the government will 60% co-fund new equipment purchases, to help suppliers return to pre-flood production levels faster.

Last week the government also created a new Government Office for Flood and Landslide Recovery, which will be charged with drawing up disaster recovery programmes.

At the height of last month’s heavy rain, more than 10in of rain fell in some parts of the country in just 48 hours.

The flooding – thought to be the country’s worst natural disaster – is estimated to have caused $500m worth of property damage alone.

Slovenia’s automotive sector employs more than 16,000 people and created revenues worth €4.1bn in 2022.

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