Subaru Extends Shutdown, Cites Unpredictable Chinese Supply Chains

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]