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US auto industry on edge after EU plants shut

Mar 16, 2020 | 04:09 PM | New York | Rijuta Dey Bera

Tags  General Motors, FCA, UAW, auto, coronavirus

The automobile industry in the United States is on the edge due to the fast spread of the novel coronavirus (2019-nCoV) across the western hemisphere, which has caused multiple auto plant closures in hard-hit European countries.

“All options related to protecting against exposure to the virus are on the table,” according to a task force formed by the United Auto Workers (UAW) union, General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles (FCA) on Sunday March 15, hinting at the possibility of auto plant closures.

The Covid-19/Coronavirus Task Force - led by UAW president Rory Gamble, GM chairman and chief executive officer Mary Barra, Ford executive chairman Bill Ford, Ford president and CEO Jim Hackett and FCA CEO Michael Manley - was formed to “implement enhanced protections for manufacturing and warehouse employees at all three companies” following news last week that a worker at FCA's plant in Kokomo, Indiana, had tested positive.

FCA said on Monday that its FCA Italy and Maserati subsidiaries were temporarily suspending production across the majority of their European manufacturing plants, effective through March 27.

Plants to be shuttered included FCA’s production plants in Melfi, G. Vico (Pomigliano), Cassino, Mirafiori Carrozzerie, Grugliasco and Modena, in Italy; Kragujevac, in Serbia; and Tychy, in Poland.

Asked whether FCA’s plants in the US are at risk of closure as well, a company spokesperson indicated this was a possibility.

"Clearly, this is a fast evolving situation and we are managing all our manufacturing plants in function of employee welfare, parts supply, market demand and governmental guidelines on economic activity," a spokesperson for FCA US said in an email to Fastmarkets.

General Motors was continuing to monitor new developments. "Please know we are continuing to monitor the situation very closely. As of right now, [there has been] no impact on our North American manufacturing operations," a company spokesperson said.

French automaker Groupe PSA also announced on March 16 that it was halting car production in Europe, including the Vauxhall factories at Ellesmere Port and Luton, in response to the rapid acceleration of the coronavirus.

“Car makers have an even bigger concern on the supply side,” Christian Stadler, professor of Strategic Leadership at Warwick Business School and an expert on the automotive industry, said in response to PSA’s decision to shutter car production.

“Every car contains somewhere in the region of 30,000 different parts, many of which come from China,” he added.

Figures from the China Association of Automobile Manufacturers show vehicle production slumped by 45.8% year on year in the first two months of this year, according to Fastmarkets analyst James Moore.

Automakers in Wuhan, China, where the coronavirus originated, restarted operations in early March, Fastmarkets analyst Andy Farida noted in a report, “but factories continue to face hurdles in the short term amid the lack of raw materials due to supply chain disruptions, stringent checks and lack of workers, which suggests that it will take time for plants in the region to reach their full utilization rates.”

The airline industry, another major consumer of metals, has been particularly hard hit, with the industry requesting a government bailout of $50 billion to tide over the “unprecedented economic downfall” due to the pandemic.

Airlines for America, which represents US carriers such as Delta, United, American and Southwest, recommended passenger carriers immediately receive up to $25 billion in grants to compensate for reduced liquidity and in the medium term $25 billion in low- or zero-interest loans.

The US Federal Reserve has interest rates to near zero, promising to boost its bond holdings in an effort to support economic activity.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was at $28.25 per hundredweight ($565 per short ton) on March 13, down by 2.9% from $29.09 per cwt a day earlier and off by 6.5% from $30.21 per cwt on March 6.


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