Dark, Contagious Clouds Gather Over the Auto Industry

Matt Posky
by Matt Posky
dark contagious clouds gather over the auto industry

With South Korea, Italy and Iran now reporting growing coronavirus outbreaks, it looks like this is going to be one of these long-haul illnesses that sends everyone to the store to stock on up on milk and bread. As you might have guessed, automakers have continued issuing warnings as the virus’ range continues to expand. On Wednesday, Toyota announced that its Japanese plans will undoubtedly be impacted by parts shortages over the next few weeks as Chinese suppliers remain dormant.

The worst of the outbreak is still located in Wuhan, where the virus is spreading out toward China’s coastal cities. Reliable figures for the number of people affected are difficult to come by. The Communist Party of China (CPC) and World Health Organization (WPO) both claim China had this one in the bag, with new cases always reported as “slowing” — an assertion you would be forgiven for doubting. COVID-19 seems anything but under control. This week, the Centers for Disease Control and Prevention told U.S. citizens to prepare for the worst as the stock market stumbled over fears of a global pandemic.

While Toyota says it’s still receiving parts from Asian suppliers, it believes the situation could change by next week. Many Chinese factories are still closed and some of the facilities that are open are operating at limited effectiveness due to workers staying home. Others sites may be forcibly quarantined if an employee tests positive for COVID-19, resulting in weeks of downtime.

Regardless of how bad the virus ultimately gets, Toyota still plans on minimizing all non-essential travel for employees in Japan. Going to China is out of the question unless absolutely necessary, and even travel between Toyota’s domestic facilities will have some limitations. The automaker plans to reassess the situation on March 9th, when it will assuredly take advisement from the New Coronavirus Countermeasures Automobile Council.

Fiat Chrysler Automobiles, already trying to cope with the latest outbreak in Italy, has also sounded the alarm. In a Tuesday regulatory filing, FCA said epidemics pose a legitimate threat to the automotive industry. While it claims it is too soon to predict how hard the coronavirus would be on its business, FCA framed the overall situation as fairly gloomy, saying it could unpleasantly impact FCA’s financial performance. The manufacturer is already reporting supply chain troubles and has begun limiting who it allows inside its Italian facilities as a precaution.

From FCA:

We are also susceptible to risks relating to epidemics and pandemics of diseases. For example, the recent outbreak of coronavirus, a virus causing potentially deadly respiratory tract infections originating in China, may negatively affect economic conditions regionally as well as globally and may disrupt supply chains and otherwise impact operations. Governments in affected countries are imposing travel bans, quarantines and other emergency public safety measures. Those measures, though expected to be temporary in nature, may continue and increase depending on developments in the virus’ outbreak. As of the date hereof, we have temporarily halted production at one of our European plants because of an interruption of critical supplies. The Chinese automobile market has also begun to experience reduced demand. The ultimate severity of the coronavirus outbreak is uncertain at this time and therefore we cannot predict the impact it may have on our end markets and our operations; however, the effect on our results could be material and adverse.

Unless something changes to stifle the coronavirus’ infection rate, expect to see profit warnings and rolling reports of automakers having to contend with parts shortages over the next month. It could be a very exciting spring.

[Image: B.Zhou/Shutterstock]

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  • TimK TimK on Feb 27, 2020

    The 24-hour news cycle has everyone trained now, and for most people it’s impossible to focus on events that unfold on longer timelines. A farmer instinctively understands this pandemic and what he needs to do in his life to deal with it. Netflix bingers/gamers/Alexa fans, they might be a bit confused when reality punches them in the face.

  • Tstag Tstag on Feb 27, 2020

    At one level this virus doesn’t seem much worse than the flu. That kills about half as many people every year. But when governments close schools, factories, towns and cities in response then directly or indirectly we are all affected. According to one report I saw this virus could result in another 2008 financial crisis. If that’s the case expect more Saab’s and more auto consolidation. All I can say is thank God no one is dumb enough to do something as big as Brexit at the same time.... oh wait....

    • HotPotato HotPotato on Mar 01, 2020

      Yep. Been watching the Crown and it has made me go back and read modern British history. People forget JUST HOW POOR and backward the UK really was after the war. Rationing didn't end with the war, it went on FOR YEARS. Class hatred was so bad that politicians restricted commercial electricity availability to three days a week rather than pay striking coal miners a living wage -- in MID 1970s. Moving toward and into EU membership was a move by the center-right, the business class, to rescue the country economically with tariff-free export markets and culturally with free movement. And it fecking WORKED. But appeals to nativism and nostalgia are powerful. They enabled Maggie Thatcher to bungle and poison EU relations from the start, and and Boris Johnson to twist the public's view of the EU for years with outrageous lies (remember the nonexistent requirement for straight bananas?) when he was a "journalist" and then a politician. It's not surprising to me that a power-mad narcissist will put their interest over the public interest. It is surprising to me that half-wit voters will let them get away with it. Anyway, back to cars.

  • Jim Bonham Full EVs are not for everyone, they cannot meet all needs. Hybrids do a much better job of providing the benefits of EVs without most of the drawbacks. I have a hybrid sedan with plenty of room, plus all the bells and whistles. It has 360 hp, AWD, does 0-60 in just over 5 sec.(the instant torque is a real benefit), and I get 29 mpg, average. NOT driven lightly. I bought it used for $25k.Sure, it's a little heavier because of the battery, motor, etc., but not nearly as much as a full EV. The battery is smaller/lighter/cheaper and both the alternator and starter motor are eliminated since the motor assumes those functions. It's cool to watch the charge guage show I'm getting energy back when coasting and/or braking. It's even cooler to drive around part of the time on battery only. It really comes in handy in traffic since the engine turns off and you don't waste fuel idling. With the adaptive cruise control you just let the car slowly inch along by itself.I only wish it were a Plug-in Hybrid (PHEV). Then, I'd have A LOT more EV-only range, along with even more of that instant torque. The battery would be bigger, but still a fraction of the size of a full EV. I could easily go weeks without using much, if any gas (depending upon my commute) IF I plug it in every night. But I don't have to. The gas engine will charge the battery whenever it's needed.It's just not as efficient a way to do it.Electric companies offer special rates for both EVs and PHEVs which lower your operating cost compared to gasoline. They'll even give you a rebate to offset the cost of installing a home charger. You can still get federal (up to $7,500, plus some state) tax credits for PHEVs.What's not to like? My next daily driver will be a PHEV of some kind. Probably a performance-oriented one like the new Dodge Hornet or one of the German Hybrid SUVs. All the benefits, sound, feel, etc., of a gas vehicle along with some electric assist to improve fuel economy, performance, and drivability. None of the inherent EV issues of cost, range anxiety, long charging times, poor charger availability, grid capacity issues, etc. I think most people will eventually catch on to this and go PHEV instead of going full EV. Synthetic, carbon-neutral eFuels, hydrogen engines, and other things will also prevent full EVs from being 100% of the fleet, regardless of what the politicians say. PHEVs can be as "clean" (overall) as full EVs with the right fuels. They're also cheaper, and far more practical, for most people. They can do it all, EVs can't.
  • Ron rufo there is in WaSHINGTON STATE
  • ToolGuy @Chris, your photography rocks.
  • ToolGuy No War for Oli.If you have not ever held a piece of structural honeycomb (composite sandwich) in your own hands, try it.
  • ToolGuy You make them sound like criminals.