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Auto Parts Supplier Visteon Expects Global Auto Output to Fall by 25%, Despite Early Signs of Recovery

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【Summary】As global automakers begin to restart auto production after the coronavirus pandemic, automotive component supplier Visteon is predicting that global production volumes for the auto industry will fall between 20% and 25% in 2020, but further warned it might take a few years before they return to 2019 levels.

Eric Walz    Jun 12, 2020 10:00 AM PT
Auto Parts Supplier Visteon Expects Global Auto Output to Fall by 25%, Despite Early Signs of Recovery

As global automakers begin to restart auto production after the coronavirus pandemic, its been generally taken as a positive sign that automakers will eventually emerge from the global pandemic with a strong rebound.

However, one of the world's biggest auto suppliers Visteon Corp projects that global output will drop significantly as supply chain interruptions will force automakers to scale back production.

Visteon is predicting that global production volumes for the auto industry will fall between 20% and 25% in 2020, but further warned it might take a few years before they return to 2019 levels, Reuters reports.

Although restarting auto plants is an important first step for the industry, automakers rely on a vast global network of suppliers like Visteon to keep their assembly lines running smoothly. 

The coronavirus pandemic forced suppliers to shut down factories and disrupted automakers' global supply chains for over two months, which is expected to create part shortages as vehicle production begins to ramp up.

Most U.S. auto suppliers began the process of restarting their factories in late May. 

"Even before COVID-19, the auto industry was slowing down globally and most notably in China, and COVID-19 has dealt a significant blow, pushing the industry to levels that have not been seen in a long time," Visteon Chief Executive Officer Sachin Lawand said at a Deutsche Bank auto industry conference.

However, Lawand said China's auto industry has rebounded to almost pre-COVID production levels.

Visteon is headquartered in Van Buren Township, Michigan and is a major supplier to U.S. automakers General Motors and Ford Motor Co., including electrical components for the development of autonomous vehicles. The company has approximately 10,000 employees at over 40 facilities in 18 countries and reported sales exceeding $3 billion in 2018. 

IHS Markit, which closely monitors sales trends and production in the auto industry, has forecast global light vehicle sales to fall 22% to 70.3 million units in 2020, representing more than 12% decline.

Reuters also reports that Michigan-based supplier BorgWarner flagged volatility in production schedules for OEMs, even after its factories resumed output in mid May. 

Around 16.8 million motor vehicles were produced in North America in 2019, slightly less that the 17.2 million vehicles produced in 2018, according to data from Statista. The auto industry accounts for around 3% of America's GDP.

Visteon's shares have fallen by over half this year, from $87.83 on Feb 12 to $40.38 by April 3. The stock has since recovered from its early April lows, rising nearly 5% on Friday to $73.20.


resource from: Reuters

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