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Automakers announce work-from-home policies and production impacts as COVID-19 virus outbreak worsens in Spain, Italy and US
Over the weekend of 13 March, announcements continue to roll in regarding changes in working policies for salaried staff as well as increasing production impacts in Italy, Spain and the US.
Further to previously announced stoppages Fiat Chrysler Automotive (FCA) has said that it will stopping almost all production in Europe for the next two weeks. The OEM will close all six Italian factories that build Fiat, Jeep, Maserati, and Alfa Romeo products. The company is also shutting down Fiat Auto Poland (FAP) and its Serbian plant which builds the Fiat 500L. Meanwhile FCA CEO Mike Manley is encouraging all office-based employees to work remotely in an effort to combat the spread of the coronavirus disease 2019 (COVID-19) virus. The programme is designed to be flexible to allow for a mix of remote and on-site work, according to a spokesperson.
Ford to idle Valencia plant
Ford announced on 15 March 2020 that it will close its Valencia (Spain) auto assembly plant for one week after three employees tested positive for COVID-19. The company statement said, "We have had three positive cases of COVID-19 in the Ford Valencia plant in the past 24 hours," and Ford followed protocol by isolating all employees who had contact with the infected workers. The Ford Valencia closure, however, is among the few reactions specifically to employees testing positively.
Ferrari idles Maranello and Modena, Brembo closes Italian plants for one week
Ferrari issued a statement on 14 March suspending production at Maranello and Modena (Italy) until 27 March 2020. The statement reads, "The decision has been taken by the Company for its employees' well-being and follows a number of rigorous preventive measures already implemented by the Company to guarantee the highest health standards in light of the Italian Government's decree on COVID-19 issued on March 11, as well as previous decrees. The Company, that had ensured continued production so far whilst placing employees' wellbeing as its main priority, is now experiencing the first serious supply chain issues, which no longer allow for continued production. All non-manufacturing-related activity will continue on a regular basis, leveraging the opportunities provided by smart working." Smart working is the term Ferrari employs for working from home.
On 13 March 2020, Brembo announced it would close all four Italian plants for cleaning. In a statement, the supplier said the plants will be closed from 16 to 22 March 2020, given "the evolution of the COVID-19 pandemic and consequent objective inability to operate with continuity."
Renault and Nissan's Spanish plants affected
Reuters reports that Nissan's two Barcelona (Spain) plants stopped work on 13 March 2020 because of a nearby wheel supplier's COVID-19 virus impact. The Nissan facility does not operate at the weekend, and the closure was expected to run until at least Monday 16 March; between the facilities, about 3,000 employees are affected. In addition, Renault plants in northern Spain will halt production for at least two days during the week of 16 March 2020, also because of a lack of components. A Renault spokesperson is quoted as saying, "[Thursday] we had no problems, and now we have to stop for two days from Monday in Palencia and Valladolid," as result of supply chain setbacks in Catalonia. The Renault sites employ about 6,000 people.
VW to close US plant for one day; SEAT to close Martorell for up to six weeks
Volkswagen (VW) is closing its US assembly plant for one day on 16 March as a precautionary measure, according to Automotive News. The move will allow for deep cleaning of the plant as a precautionary measure against the spread of the COVID-19 virus. VW is quoted as saying, via email, that the shutdown will "allow plant employees time to make arrangements for child care during the two-week school closure there. This will be paid time off. We will also take this time to augment the already increased sanitary and deep-cleaning measures undertaken at our facility."
According to Reuters, VW division SEAT's Martorell plant is experiencing production and logistics problems related to the COVID-19 virus outbreak. The report notes that the 7,000 employees may see temporary layoffs. A union leader at SEAT reportedly told Reuters the stoppage could last up to six weeks.
US auto industry begins widespread work-from-home arrangements
In the US, the federal government and several states have issued states of emergency relative to the situation; what this means in practical terms is that government agencies have faster access to funds and resources for combatting the situation. Many school districts have closed through various dates in April and many local jurisdictions are restricting gatherings to under 250 or so people and encouraging people to stay at home and implement "social distancing." The actions are not unlike some containment efforts in China, South Korea, Japan, Italy, and Spain, but have resulted in a number of automakers and suppliers issuing statements on work-from-home policies. Tesla has ordered its 30 US employees working on the Berlin factory in Germany to return the US as well.
GM, Ford and FCA CEOs issued work-from-home advisories for global salaried staff, beginning on 16 March 2020, with no end date advised. All have also noted that the work-from-home policies already applied to operations including China, Italy, and Japan. GM CEO Mary Barra's statement noted that for areas of the company unable to work remotely (manufacturing, global product development, customer care and after sales services) schedules are being adjusted for additional cleaning. Ford CEO Jim Hackett noted, "Since the coronavirus issue is rapidly diminishing in China and our team there already has begun to return to work, this action does not apply to our team in China." At FCA, CEO Mike Manley instructed staff on 12 March 2020, with the email reported by Automotive News. Manley says FCA is "accelerating the deployment of working remotely... At our offices in China, Korea, Japan and Italy this practice has become the 'new normal.'" FCA has also "introduced a very strict policy on external visitors at FCA sites." For US operations at BMW, Nissan and Mercedes-Benz, work-from-home protocols have been initiated, most as of 16 March 2020. Toyota, VW and Honda have not yet shifted to work from home protocols, but have taken measures that include reduced travel and meeting size as well as more frequent sanitisation. Honda has instituted screening measures for visitors to its sites, and Toyota noted it is considering a work from home alternative. Suppliers instituting work from home measures include ZF North America and Adient; Delphi and Denso were evaluating the situation at time of writing, but had not yet shifted to working from home.
Outlook and implications
As COVID-19 virus concerns slowly ease in China, they are accelerating in other regions. Reports of closures are increasing as more countries also impose efforts to restrict movement, looking to slow the spread of the COVID-19 virus and incidents of the disease. Spain has imposed a 15-day state of emergency, while in the US federal government and several states are restricting gatherings, closing schools and imposing states of emergency. At the same time, the situation in China is improving, suggesting that while the next months are likely to be difficult, there is reason to expect an eventual return to normality. In the meantime, IHS Markit continues to adjust production and sales forecasts in reaction to the immediate situation.
These moves follow global spread and the World Health Organization (WHO) naming the COVID-19 virus a pandemic. That shift in definition means that the disease has spread globally, according to the WHO; it did not change the agency's protocol recommendations for quarantine or safeguarding health. However, the change has prompted businesses and governments across the globe to minimise contact and congregation. Even as the Americas and Europe are locking down, however, there are signals that the situation is abating in China, with Honda and Toyota reopening some plants.
Among the reasons for Spain to see an accelerating impact is that on 13 March, the country announced that a 15-day state of emergency would start on 14 March; Italy imposed a lockdown earlier in the month. These are likely to be followed by other production impacts, with impact on Italy and Spain growing in recent days.
With our 12 March report, we noted on the highly integrated global supply chains used by OEMs and Tier-1 component manufacturers, the extended stoppages in China and the subsequent slow ramp-up there are likely to have left gaps that can not necessarily be filled from existing stock or elsewhere. It also remains to be seen whether the impact of the COVID-19 virus outbreak in the rest of Europe ends up being as significant as that in Italy, although as noted, Spain implemented a state of emergency on 14 March. If the outbreak is as significant across Europe as in Italy and other countries implement similar measures, the impact on both sales and production may grow. IHS Markit is currently expecting to cut its European light-vehicle production forecast for 2020 by between 500,000 and 600,000 units in our next forecast round, of which between one-third and one-half is related to the COVID-19 virus outbreak. We continue to monitor the situation and provide further updates to our forecast as it develops.
In the US, the VW closure is the first assembly plant shutdown in the US related to containing COVID-19 and is brief. Although the VW move is precautionary, there is potential for other OEMs to take similar decisions and for disruption of the supply chain to create further production disruptions. VW has not reported any employees at its Chattanooga facility testing positive for the virus at time of writing, as FCA announced earlier.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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