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CHINA: Power supply crunch sees VW and GM ordered to stop car output for a week

By just-auto.com editorial team | 23 July 2004

China's commercial hub of Shanghai, grappling with a worsening power crunch, reportedly has ordered its two largest auto makers to shut production for more than a week, company executives said on Friday.

According to Reuters, Volkswagen halted operations from last Friday for 10 days - but said that would not affect overall output because it had ramped up production ahead of time to compensate.

Cross-town rival General Motors had shut its plant one day before, but said that was for annual maintenance, the report noted.

The fact the city had cut power to two of its highest-profile multinationals underscores the extent of fears about a crisis worse than last summer's, when a scorching heatwave and resulting shortages pushed 1,000 firms to curtail output, Reuters said.

On Friday, electricity consumption in Shanghai surged to a fresh record of 15 million kWh -- less than two weeks after setting a new peak, state television reported, according to the report.

Shanghai Television reported that, this year 2,100 companies in Shanghai had already been asked to run at night, while 3,000 others will switch between day and evening operations, Reuters said.

The emergency measures reportedly come as adjacent Hangzhou, the capital of wealthy Zhejiang province, moved to high alert this week, ordering hundreds of plants to halt for up to four days a week.

"It's a rule. We have to cut power for 10 days," Shanghai Volkswagen spokesman Lu Jun told Reuters, adding: "It started last Friday. We've cut power and so have had to stop production. It's all over Shanghai. But we've already front-loaded our production, so it won't affect sales for the year."

Lu reportedly said Volkswagen and GM venture partner, Shanghai Automotive Industry Corp (SAIC), had done the same but other energy-intensive factories denied they were affected.

A government spokeswoman told the news agency she was unaware of any such citywide ruling.

GM executives reportedly said they stop production anyway for routine maintenance every year, and this year was no different.

"Shanghai GM is ... carrying out its annual routine manufacturing line maintenance and checkup between July 15 and 25," the company told Reuters in a statement, adding: "This also accords with a request from the Shanghai municipal government to shift its hours of operation in order to help the municipality save energy."

Years of under-investment in capacity and transmission - partly as a result of a grinding bureaucracy - coupled with a ballooning middle-class snapping up home appliances, have left China facing its worst power crisis in decades, Reuters noted.

Temperatures in the day in the eastern metropolis have been hitting 37C. (98.6F.) this week and the city could seed clouds to make rain as early as next week to cool searing temperatures, state media reported, the news agency added.