By on April 1, 2020

Subaru Legacy 2018 Logo Emblem Grille

Subaru is joining the long list of automakers closing shop on account of the coronavirus. Japanese production is being suspended at the automaker’s main plaint in the country’s Gunma prefecture from April 11th through the first of May. It’s also idling the Oizumi engine facility as it announces plans to extend the suspension of its U.S. facility in Indiana. The plant will now be idled through April 20th.

While some of the closures are due to social distancing obligations, the rest is down to parts allocation. Subaru is heavily reliant on components manufactured in China, and it’s still not clear how things are actually going there. What is clear is that Subaru (and plenty of other manufacturers) can’t do without its robust industrial sector operating at full strength. Subaru CFO Toshiaki Okada said in February that “it’s impossible to manufacture cars without China.” 

Like most Japanese manufacturers, Subaru is being negatively affected by supply chain breakdowns stretching back to when COVID-19 first emerged in China’s Wuhan province. While the People’s Republic is now supposed to be in recovery, according to its own state-backed media, its national leadership expelled U.S. journalists two weeks ago at a time when reliable information was already difficult to come by.

Officially, China has managed to put a cap on the coronavirus, though estimates from Wuhan citizens speaking to Radio Free Asia suggest the death toll and infection rate were much higher than claimed — referencing the large number of urns being delivered to funeral homes and crematoriums as circumstantial evidence.

While the World Health Organization (WHO) supports China’s official coronavirus headcount, that body faces growing criticisms for initially claiming there was no reason to enact travel restrictions — something all countries have since done to curtail the virus’ spread. Bruce Aylward, senior advisor to the Director General of the WHO, also refused to recognize Taiwan as a sovereign nation in a recent interview (before later suggesting it was part of China).

This calls the legitimacy of both China and the WHO’s COVID-19 estimates into question, making it more difficult to predict how the recovery is actually faring in the PRC. Japanese automakers are still noting supply chain issues stemming from factory closures, with some reopened Chinese facilities reportedly operating with a fraction of their normal staff.

Mazda, Mitsubishi, Nissan, Subaru and Toyota have all enacted factory suspensions in Japan. Some of those are in response to localized health concerns aimed at slowing COVID-19’s spread. Others, however, are the direct result of supply chain problems with China and uncertainties as to when components can be reliably sourced from the country. On Monday, vice industry minister Xin Guobin said China’s manufacturing output had returned to between 70 to 90 percent of its normal strength. Still, in the same announcement he also warned other nations to prepare for rather serious supply chain hardships (especially in relation to exports) over the coming weeks.

Japanese automakers have already established the New Coronavirus Countermeasures Automobile Council to contend with virus-related complications. While its primary mission is mitigating COVID-19’s spread through the industrial sector, it also places a strong focus on figuring out how to help car companies navigate supply problems. Even if China has turned a corner, supply chains will take a while to catch up, with a lingering gap in consumer demand.

[Image: Subaru]

 

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16 Comments on “Subaru Extends Shutdown, Cites Unpredictable Chinese Supply Chains...”


  • avatar
    SCE to AUX

    “This calls the legitimacy of both China and the WHO’s COVID-19 estimates into question, making it more difficult to predict how the recovery is actually faring in the PRC.”

    ^^ This. The spread seems to be directly related to population densities, and China would be near the top for this. The PRC police state will always spin the information to make them look better.

    My own company is having trouble getting parts from China, and we produce medical equipment.

    • 0 avatar
      Nick_515

      “The PRC police state will always spin the information to make them look better.”

      Thank the lords we’ve done so much better in the information flow regarding this thing.

  • avatar
    thornmark

    >> Subaru is heavily reliant on components manufactured in China<<

    who knew

    the worm has turned – China is a pariah state – by the time this is over people will refuse to buy Chinese products or products w/ Chinese components – just read that Australians are refusing to unload Chinese ships

    I guess America should have learned when they poisoned our pets w/ melamine

    GM, your "investment" in China is a bust

    and btw, this is ag/ the Chinese totalitarian gov, not their enslaved populace

    • 0 avatar
      threeer

      Don’t bet on it. As soon as this is over, we’ll all go running back to China for our cheap goods. We’ve become dependent on them, dangerously so, as evidenced by our own lack of ability to provide equipment needed for our own citizens. A country that cannot provide for itself becomes slave to those that can. And China knows this. We should have an awakening over this, but the only wake up call will be the siren song of sales ads at Walmart beckoning us back in.

      • 0 avatar
        hreardon

        While I agree that once the dust settles, in the short run companies will be back to buying from China, the wheels are turning to move production out of China. I have several clients who started the investigative process during the past two years of the trade war, and Covid has accelerated that process.

        As I’ve said elsewhere: What the US should have done all along was to pour resources into helping to develop infrastructure in Latin America to support manufacturing moving there. Let’s be honest – most of the manufacturing is not coming back to the US, but the second best option is to get it to move to Latin America. We get the dual benefit of depriving the Communist Chinese government of our intellectual property+money, and, by supporting Latin America, we keep more people from trying to enter our country.

        Alas, this type of policy making requires nuance, subtlety, and clarity – something government writ large is incapable of, and which Trump is anathema toward.

      • 0 avatar
        Mike-NB2

        threer – I think you’ve nailed it. What you predict will happen.

  • avatar
    Gardiner Westbound

    Putting all your eggs into one basket is rarely a good idea. Sooner or later it will bite you in the ass.

  • avatar
    Arthur Dailey

    For years I have railed against allowing ‘free trade’ the importation of goods without tariffs from China.

    They are a ‘renegade’ state. Less willing to play by international rules than some nations that the USA has ‘invaded’, occupied or imposed sanctions against.

    My employer has been adamant for years that we must always have at least one local supplier. Even if it means that our cost is higher than if we imported the same product from China.

    History has again proven his judgement to be correct.

    As others have stated, I would rather pay 20% more for clothing, small electronics that are made locally.

    But corporations are greedy. For example when Nike bought Bauer Canada, they moved the production of hockey skates from Ontario to Asia, yet more than doubled the selling price of the skates. And the defect rates became significant. They offset this by increasing their marketing and signing on athletes as spokespeople.

    And yes, there are people who purchase products, even inferior, over priced ones, because of the advertising/endorsements. Advertising works, and so apparently do ‘social influencers’.

    • 0 avatar
      Guy A

      I am glad tariffs against Chinese goods were enacted and can continue to help aid repatriating some important manufacturing back to the US (such as medicines).

    • 0 avatar
      Art Vandelay

      Id say that it is time Western nations take it to the next level and quit servicing Chinese held debt as a means to helping finance the clean up. When you can’t pay the bank the money you owe on your mortgage, you have a problem. When the Free World as a whols decides to cease paying such a debt, the bank has a problem.

      Furthermore I think it is time to give the Apples and other companies that make most of their money off of the American Consumer while making almost all of the product in China some ultimatums. Samsung, LG, and other electronics makers build significant chunks of their product in their home market and make money. If these companies want to continue this, fine…then time to pay up for that. Sorry if your iPhone costs more. Buy a phone built in Japan (as was my Sony, South Korea, or preferably, The United States.) China is not ready to join the rest of the first world and frankly we should treat them in a similar manner to how we treated the Soviet Union.

    • 0 avatar

      Why China has to follow rules when there so many fools in the West? They produce cheap garbage that after few uses goes to landfill because it is a garbage. We used to buy stuff that lasted decades. Well that was before China’s manufacturing domination.

    • 0 avatar
      hreardon

      Frankly, I do not understand how we cannot get bipartisan support to tariff/boycott China heavily:

      1. No respect for workers’ rights
      2. No respect for human rights
      3. No respect for animal rights
      4. No respect for the environment
      5. No respect for women

      Based on these five fundamental core values – America should recognize that our value systems and norms are completely incompatible. On a moral level, our deep level of financial interdependence is completely unacceptable.

      With our economy obliterated, we don’t have much left to lose at this point. Provide the incentives to pull that manufacturing out of China and move to to countries whose values and norms are more closely aligned with ours.

      • 0 avatar
        Mike-NB2

        Bipartisan AND bi-national. I’m sure you’d get Canadians in on this in a heartbeat with the mess we’re in with China now. At the US government’s request we detained Meng Wanzhou, chairperson of Huawei, when she was transiting through Vancouver. You guy want her extradited on fraud charges. We’re treating her well and she’s under house arrest in a Vancouver condo with the ability to go out. In retaliation, the Chinese arrested two high profile Canadians and these poor folks are held in dank cells and interrogated frequently with little access to consular officials.

        I’d add “No respect for the rule of law” to your list but they are following the rule of law in this case. It just happens to be the Communist Party rule of law.

  • avatar

    That cannot be true. we were told that Toyota, Honda, Subaru et al are redblooded American companies and only traitors like GM and Ford use Chinese parts.

  • avatar
    Luke42

    “Subaru is heavily reliant on components manufactured in China, and it’s still not clear how things are actually going there.”

    The job I started in January involves dealing with Chinese suppliers.

    When you have a question like this, you pick up the phone and ask. It’s not some big mystery.

    Yes, you have to be aware of timezones and talk to someone in your supply chain who speaks English, but these folks have their customer service hat on and you’re the customer. The fact that it’s China doesn’t change much, because we’re all in this to sell things and make money.

    I trade emails with engineers and managers in Chinese factories every day. Chinese factories do very dramatically in how much they have their stuff together — but world-class business all operate pretty similarly across the world.

    Communicate, navigate, aviate. It’s not rocket science, but your priorities in the office is the reverse of your preferences in the cockpit. (In the cockpit, you aviate first.)

  • avatar
    conundrum

    “Mazda, Mitsubishi, Nissan, Subaru and Toyota have all enacted factory suspensions in Japan.”

    Who writes this horse manure? Subaru doesn’t have a factory in China. Never has had. Oh, I see, it’s the same person who informed us Chinese medicine was in the Stone Age, and that their buildings fell over in a light breeze. Right, that authority.

    And then I get to read the usual American hate against China in the commentary by dopes who haven’t got a clue, who forget it was their own corporate people who fell over themselves yanking jobs out of the USA to get product made in China — cheap. But does logic or memory ever prevail? Not on your nelly. I get fed the same nonsense the US government puts out to its brainwashed citizenry and swallowed whole. Not a surprise – Canada repeats US foreign policy and feeds it to me too, but I don’t fall for most of that crap.

    And I’m not even a Chinaphile myself, but hell, I can tell truth from fantasy. China has treated Canada like complete sh!t on numerous issues, mostly over bogus claims about the quality of our grain and meat exports, but so has the US, with the Mango Mussolini claiming Canadian steel and aluminum exports were a national defence issue or some utter claptrap. And now the US has commandeered a planeload of M95 masks from China that was going to France. With friends like that … and a health system like that.

    If anyone with a memory existed amongst the august band who write for TTAC, they’d recall Subaru was denied a license to build a factory in China. They waited too long and then the Chinese decided that Toyota’s 16.5% of Subaru at the time meant that Toyota owned Subaru, so denied the application. Gee, that ranks right up there with the illogical commentariat brainpower here — link below for the truth of the matter. There is NO Subaru China factory – they buy stuff for their CVTs from Schaeffler, a German outfit, with guess what? A factory in China. And no doubt Subaru sources their their intrument panels and various other parts there like piston rings from “international” suppliers. Just like everyone else. Toyota is also saying its Japanese factories are facing a shortage of Chinese parts and may have to halt production. There is this Japanese business website called Nikkei, you know, among others.

    https://www.japantimes.co.jp/news/2012/11/20/business/subarus-lack-of-china-plant-pays-off/#.Xoau73vQ-dk

    FCA in Serbia can’t make more of its ugly-as-sin Fiat 500L “cars” in Serbia due to lack of Chinese parts, either.

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