A burning cargo ship adrift in the Atlantic Ocean carrying approximately 4,000 luxury automobiles from Volkswagen AG (OTC:VWAGY) could cost the German automaker at least $155 million.
What Happened: Russell Group Ltd., a British risk modeling group, estimated the total dollar value of goods on the vessel was $438 million, of which approximately $401 million was related to the automotive cargo and another $38 million was related to non-vehicle goods.
Suki Basi, managing director at Russell Group, told the financial news site Reinsurance News that the “Volkswagen brand and its subsidiaries do indeed have a significant exposure to this event, running into the millions.”
Basi added that auto manufacturers other than Volkswagen with vehicles on the vessel may have lost about $246 million worth from the disaster.
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Why It Happened: The 650-foot, 60,000-ton cargo ship called the Felicity Ace departed from Emden, Germany, on Feb. 10, to Davisville, Rhode Island, for the delivery of European luxury cars. A fire started Feb. 16 on the vessel that the crew was unable to contain, and the Portuguese military evacuated the 22-member Felicity Ace crew roughly 200 miles off Terceira Island in the Azores.
Many of the vehicles on the vessel are all-electric, battery-powered cars, which creates a problem for putting out the fire because the toxic flames from burning lithium-ion batteries cannot be extinguished with water.
Basi observed the incident “showed once again the precariousness of global supply chains” while pointing out it came at a particularly bad time for “global carmakers who are in the middle of a supply chain crisis sourcing semiconductors, resulting in new delays for new cars. An event like this will not do a great deal in instilling trust with consumers.”
Photo: Portuguese Navy
