VW's Skoda says Ukraine partner making wire harnesses again

PRAGUE — Skoda Auto, part of the Volkswagen Group, said on Tuesday its supply partner in Ukraine had decided to restart production of wire harnesses which should allow the Czech carmaker to resume production of its electric ENYAQ iV model.

Russia's invasion of Ukraine has added to supply chain problems for global automakers — which were already struggling with semiconductor shortages that have cut production — with a break in deliveries of wire harnesses from the war-torn country.

While Skoda, the Czech Republic's biggest exporter, said it expects the supply of semiconductors to improve in the second half of 2022, it said the war in Ukraine and supply bottlenecks will put a significant burden on its operating business.

Skoda's 2021 deliveries fell 12.6% year-on-year and earlier this month it stopped production of the ENYAQ because of harness shortages, saying that two other models were at risk because of the lack of availability of the component.

"Our partner ... in Ukraine decided to restart production of wire harnesses this week, with full service and full security for workers there," Karsten Schnake, Skoda's board member for purchasing, said during its online 2021 earnings presentation.

Wire harnesses form a key part of a car's electrical system, which group and guide cables inside the vehicle.

"We decided to double the production in case something is going wrong, and this production will be ramped up in an alternative factory," Schnake said, adding that work there would start in three or four weeks.

"Hopefully we can restart production of ENYAQ one or two weeks later when we have wire harnesses," Schnake said.

Skoda delivered 878,200 cars worldwide in 2021, the first time that this had fallen below the 1 million mark since 2013.

Nevertheless, the VW group brand's sales revenue rose 3.9% to 17.7 billion euros ($19.5 billion) in 2021 and operating profit rose 43.2% to 1.1 billion euros ($1 billion) as it took cost measures.

Skoda did not give a financial or production outlook, saying there were still considerable uncertainties as a result of the conflict in Ukraine and the impact on its Russian operations.

Skoda, like VW, has suspended production and other business activities in Russia, which was its second-largest market last year, with 90,400 vehicles delivered.

($1 = 0.9089 euros)

(Reporting by Jason Hovet, Editing by Louise Heavens, Kirsten Donovan and Alexander Smith)

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