The Coronavirus is Disrupting Auto Manufacturing in Mexico and Europe as Parts Shipments From China Slow

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【Summary】The shuttering of manufacturing facilities the furlough of employees due to the Coronavirus is having a ripple effect in the global auto industry. The shutdown in China is disrupting the supply chains of automakers in the U.S., Mexico and Europe that rely upon a steady shipment of auto parts from Chinese suppliers.

FutureCar Staff    Mar 11, 2020 11:55 AM PT
The Coronavirus is Disrupting Auto Manufacturing in Mexico and Europe as Parts Shipments From China Slow
The assembly line at the General Motors plant in Silao, Guanajuato, Mexico. The plant builds the Chevy Silverado pickup and GMC Sierra.

The outbreak of the Coronavirus in Wuhan China has disrupted China's auto industry. Wuhan is home to much of China's auto manufacturing and is sometimes referred to as the "Detroit of China."

The shuttering of manufacturing facilities the furlough of employees is now having a ripple effect in the global auto industry disrupting supply chains to the U.S., Mexico and Europe, as many global automakers rely upon a steady shipment of auto parts from Chinese suppliers. 

Retuers reported today that some of Mexico's auto factories may have to suspend production in the coming weeks as the coronavirus outbreak disrupts shipments of key parts from China, according to local officials.

Manuel Gonzalez, economic development minister for Aguascalientes, one of a dozen Mexican states that have car factories, said some manufacturers had already told him they were running low on parts.

"I've been in contact with some important companies. They tell me that they have inventory through the second or third week of March," Gonzalez told Reuters. "If that supply is not normalized, we will probably see firms suspending production."

Auto manufacturing is a major segment of Mexico's total manufacturing, accounting for nearly 3% of gross domestic product. According to the International Organization of Motor Vehicle Manufacturers, Mexico is the world's seventh-largest auto producer.

Nearly 80% of Mexican-made vehicles are shipped to its top trade partner, the United States, including GM and Ford models that are assembled in Mexico.

The central Mexico city of Aguascalientes is a major auto manufacturing hub, with two major plants owned by Nissan Motor Co, one by Mercedes-Benz, and a Daimler and Renault-Nissan Alliance joint-venture factory. So far the plants are operational, but a disruption in the supply chain might reduce output.

Nissan has started sending parts by plane to its Mexican plants instead of by ship to avoid any setbacks to production, said Nissan Mexico corporate communications director Luciana Herrmann to Reuters. According to sources that spoke to Reuters, Nissan executives have said their plants only have inventory for the next three weeks due to problems with supplies from China.

"We're monitoring the situation and we have not confirmed any significant impact," said Herrmann, adding there was no information of an impending production stoppage.

Reports of similar supply problems have come from other car manufacturing hubs such as the states of Guanajuato in central Mexico and Chihuahua in the north.

A spokesman for General Motors Co, which has a plant in Silao, Guanajuato, said the company was operating normally for now. The plant produces the popular Chevy Silverado pickup and GMC Sierra.

U.S. automaker Ford Motor Company also has plants in the states of Sonora and Chihuahua, however the automaker has not released any information about how the Coronavius will affect production.

Problems with parts supply is already having an impact elsewhere in Latin America. Brazilian automakers' association Anfavea has warned its carmakers might have to halt production in April due to a lack of parts shipped from China.

In Europe, automaker Fiat Chrysler (FCA) is temporarily halting operations at some plants in Italy and will reduce production rates in response to the coronavirus outbreak in the country, the largest in Europe, a spokesman for the automaker said on Wednesday. Italy remains virtually shutdown in an effort to contain the virus.

FCA said in a statement it had stepped up measures across its facilities, including sanitizing of all work and rest areas, to support the government's directives to curb the spread of the infectious disease.

"As a result of taking these actions the company will, where necessary, make temporary closures of its plants across Italy," it said.

However, a source close to the matter said to Reuters that FCA does not expect an impact on overall production rates, added that the temporary closures were not linked to disruptions of the supply chain.

Fiat Chrysler said it was temporarily halting operations at some of its Italian factories and would reduce production in response to Europe's largest coronavirus outbreak.

The outbreak of the Coronavirus also is affecting auto sales, as customers stay away from auto dealerships. As reported by Reuters, forecasters at LMC Automotive on Wednesday revised their estimate for light vehicle sales downward by 4% this year, or 3.7 million cars, to 86.4 million units, the lowest level since 2013.

The revisions come as the World Health Organization called the Corona COVID-19 virus "a pandemic."

"The impact of COVID-19 on the auto industry has gone well beyond the initial focal point of China, resulting in downward forecast revisions across most major markets," said Jonathon Poskitt, Director Global Sales Forecasts at LMC.

Italian tire maker Pirelli had said on Tuesday it was cutting production at its Settimo Torinese plant in northern Italy after a worker tested positive for the virus.

Other companies including Britain's Jaguar Land Rover and Peugeot owner PSA were also scrambling to deal with infections among staff, highlighting the risks to business beyond supply chains and Italy's borders.

Peugeot said it was beefing up safety rules on Wednesday at its Mulhouse plant in eastern France after one employee tested positive, a spokeswoman said. The man has been on sick leave since Feb. 29. The plant employs 5,000 people.

German automaker Volkswagen canceled a shift at a plant near Barcelona in Spain, operated by its Spanish unit Seat, because the coronavirus outbreak has hit its supply chain.

"The Martorell plant (near Barcelona) is currently working normally. However, there are several risks derived from COVID-19, which has affected the supply chain," a Seat spokesman told Reuters.

Volkswagen's Czech unit Skoda also said there was the risk of a shortage of parts from China that might affect several of its plants.

The Coronavirus outbreak has also led to the cancellation or postponement of major auto industry events where automakers show off new models for 2021, including the Beijing International Automotive Exhibition, Geneva Auto Show and the New York Auto Show. 

The Geneva auto show was cancelled altogether, while the New York show has been moved to August. Organizers of the Beijing show said a new date will be announced in the future.

resource from: Reuters

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