Dark, Contagious Clouds Gather Over the Auto Industry

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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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.

  • Socrates77 They're pinching pennies for the investors like always, greed has turned GM into a joke of an old corporate American greed.
  • Analoggrotto looking at this takes me right back to the year when “CD-ROM” first entered public lexicon
  • Alan My comment just went into the cloud.I do believe its up to the workers and I also see some simplistic comments against unionisation. Most of these are driven by fear and insecurity, an atypical conservative trait.The US for a so called modern and wealthy country has poor industrial relation practices with little protection for the worker, so maybe unionisation will advance the US to a genuine modern nation that looks after its workers well being, standard of living, health and education.Determining pay is measured using skill level, training level and risk associated with the job. So, you can have a low skilled job with high risk and receive a good pay, or have a job with lots of training and the pay is so-so.Another issue is viability of a business. If you have a hot dog stall and want $5 a dog and people only want to pay $4 you will go broke. This is why imported vehicles are important so people can buy more affordable appliances to drive to and from work.Setting up a union is easier than setting up work conditions and pay.
  • El scotto I can get the speedometer from dad's 72 Ford truck back. I can't get dad back.
  • El scotto BAH! No dividers in the trunk for bags of onions or hooks for hanging sardines! Hard Pass.
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