# Ineos Faces Production Halt: The Fragility of Automotive Supply Chains


Ineos Automotive has announced a temporary halt in production of its Grenadier 4×4 vehicle due to a critical shortage of components, particularly seats from Recaro, which recently filed for insolvency. This situation highlights the vulnerabilities within the automotive supply chain, especially for smaller manufacturers.

## Production Delays Until 2025

In a statement to Autocar, Ineos acknowledged the complexity of automotive supply chains and expressed its commitment to resume full production as quickly as possible. The company has projected that it may not return to full manufacturing capacity until early 2025.

## Supplier Issues and Workforce Impact

Although Ineos did not officially name the supplier responsible for the production stoppage, local reports from a newspaper near the company’s Hambach facility indicated that Recaro’s insolvency was the cause. This disruption has impacted approximately 700-800 employees at the former Smart factory, who are now facing reduced working hours.

Recaro, known for producing high-quality automotive seats for niche markets, filed for insolvency in July. The company has supplied seats to prestigious brands such as Aston Martin and Ford, making its failure particularly concerning for Ineos.

## The Risks of Dependency on Suppliers

The automotive industry is no stranger to the risks associated with supplier dependencies. David Bailey, a professor of business economics at Birmingham Business School, noted that larger firms often have strategies in place to mitigate these risks, such as second sourcing. However, smaller players like Ineos lack the resources to execute similar strategies, leaving them vulnerable when key suppliers encounter difficulties.

## Exploring Alternatives

In response to the production halt, Ineos is currently exploring alternative seating options from four different manufacturers. However, finding a suitable replacement for such a critical component as a seat is not straightforward. Any new seat design must undergo homologation, which includes rigorous safety testing before it can be produced.

## Hope for Recaro’s Revival

Despite the challenges, Ineos remains hopeful about the possibility of collaborating with Recaro in the future. Philippe Steyer, the plant manager, stated that Recaro is still a viable option for the company. Given the financial resources of Ineos Group head Sir Jim Ratcliffe, an outright purchase of Recaro could be feasible, although a collaborative bailout with other Recaro clients might be a more practical solution.

## Industry-Wide Supply Chain Challenges

The automotive sector has faced numerous supply chain challenges in recent years, from natural disasters to semiconductor shortages. These disruptions have forced manufacturers to reevaluate their supply chain strategies. For instance, during the semiconductor crisis, car makers were able to raise prices on the limited number of vehicles they could produce, but such a strategy is not always applicable.

Recent incidents, such as Audi’s production delays due to issues with a specific supplier, have illustrated how a parts shortage can significantly impact a manufacturer’s profitability. Similarly, JLR and Porsche have warned of reduced output due to flooding affecting a key aluminium supplier.

## Shifting Manufacturing Strategies

Traditionally, car manufacturers have outsourced a significant portion of their components to specialized suppliers. However, the transition to electric vehicles is prompting a shift toward in-house manufacturing. Companies like Rivian are taking control of critical components, although they are not immune to supply chain issues.

In 2021, Mercedes-Benz acquired UK electric motor specialist Yasa to mitigate risks associated with early-phase suppliers. This trend reflects a broader industry movement towards strengthening supply chains to ensure resilience against future disruptions.

## Potential Solutions for Ineos

One option for Ineos could be to continue producing vehicles and store them at the Hambach facility until the seating issue is resolved. This strategy could allow the company to maintain production levels while waiting for the supply chain to stabilize.

Interestingly, a limited supply of the Grenadier could work to Ineos’s advantage. With fewer vehicles available, the company may be able to position the Grenadier as a luxury product, potentially increasing its market value. As Bailey noted, dealers may need to adopt a “catch one while you can” sales approach to capitalize on the unique appeal of the Grenadier.

## Conclusion

The current situation facing Ineos Automotive serves as a stark reminder of the fragility of the automotive supply chain. As the industry navigates these challenges, manufacturers must adapt their strategies to ensure resilience and sustainability in an increasingly complex landscape.