By on February 26, 2020

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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27 Comments on “Dark, Contagious Clouds Gather Over the Auto Industry...”

  • avatar

    Is this site going to change its name to The Truth About Corona?

    • 0 avatar
      Matt Posky

      Depending on how the next month goes, we may have to (kidding, obviously). We’ll try to consolidate virus-related news a bit moving forward, but there’s no way that this isn’t going to seriously impact the industry for a while.

      • 0 avatar

        I’m obviously kidding and as @toolguy pointed out, cars are made from literally tens of thousands of parts which happen to be sourced all over the world. This virus and the spread of it shows how intertwined we all are. We can’t easily close our borders to travel or trade.

    • 0 avatar

      Roughly 30,000 parts in a typical automobile (maybe 6,000 part numbers to the OEM, but it depends on how you count). You need all of them*. Some of them come from highlighted areas in this map:

      So yes, this is big. And automotive related.

      *Mary Barra is going to cut out 25% this year, but no one seems to want to discuss that?

  • avatar

    People say this will all blow over when it warms up in April.

    • 0 avatar

      Even if that happens, it’s still more than a month away. It will get worse until then and the only countermeasure is isolating people from each other. That means fewer people engaged in economic activity like work and shopping. It’s been years since the last recession. This could be enough to trigger another one.

      • 0 avatar

        I was being sarcastic. Bigly.

        • 0 avatar

          @woodywrkng – your viral meme was a bit too subtle ;)

        • 0 avatar

          While Woody was kidding it is a valid point of interest. The flu tends to follow a seasonal progression that strongly affects the rate of infection. Likely too early to tell so far with Covid-19 given the existing data and limited history.

          If a significant non-human reservoir is established where new variants can evolve and subsequently re-emerge (similar to pigs and birds with the flu), this could be a recurring threat. The virulence of different influenza strains have ranged from nuisance-level to fearsome killer.

  • avatar

    Yawn. Tow that media hype line. Turkey Lurkey all the time.

    • 0 avatar

      If this is just hype, the effect on the stock market to date has been very very real.

      • 0 avatar

        Yes, because the world is full of stupid people with zero common sense who think every news story and pretty colorful picture that comes across their smartphone is gospel. Nothing wrong with being prepared and educated, but this is nothing but more doomporn for distraction.

  • avatar

    Now is the perfect time to close redundant manufacturing facilities while blaming “external” issues.

  • avatar
    Jeff S

    That is exactly what will happen. Time for GM to trim some more models like the Malibu and Spark. Time for GM to close some more plants.

  • avatar

    Our Fearless Leader is railing at the stock market, angry that it shouldn’t be dropping like it has over the last few days.

    The irony will be if this virus costs him the election in November. It would be like earthly germs wiping out the Martian invaders in “War of the Worlds.”

  • avatar

    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.

  • avatar

    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….

    • 0 avatar

      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.

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