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North American auto production hit by COVID-19 virus outbreak

19 March 2020 Stephanie Brinley, MBA

Several automakers in North America announced on 18 March that they will idle production in reaction to the coronavirus disease 2019 (COVID-19) virus outbreak. Although a few plants have reported employees who have tested positive for the COVID-19 virus, the majority have not. Automakers' plans on North American production are an effort to slow the spread of the COVID-19 virus; however, currently the Europe, Middle East and Africa (EMEA) region is the global epicentre of the outbreak, with the daily number of confirmed cases in that region outstripping the number in China. In the United States and Canada, the response of government has been a combination of federal, state or provincial, and local measures. As in other regions, the countries' governments are applying seemingly ever-more stringent conditions on travel, social interaction, and workplace attendance. As is the case in other regions experiencing similar situations, this is having a marked effect on society and causing massive economic disruption, with the automotive industry at the heart of this upheaval.

This article presents a summary of the latest announcements from North American OEMs. At the time of writing, there have been no further announcements regarding North American production from BMW, Daimler, Volkswagen (VW), or Volvo, following VW's announcement of a one-day shutdown at its facility in Chattanooga, Tennessee.

American Honda announced on 18 March that it is halting North American production beginning on 23 March and running to 31 March. The decision applies to vehicle manufacturing and assembly, as well as to Honda's engine and transmission plants in the region. According to Honda's statement, the company will see a production loss of about 40,000 vehicles. Honda also stated that it "will continue to evaluate conditions and make additional adjustments as necessary. In undertaking this production adjustment, Honda is continuing to manage its business carefully through a measured approach to sales that aligns production with market demand." Honda also noted that it would continue with full pay for all associates. Honda reports that its move affects its US auto plants in Ohio, Indiana, and Alabama, two plants in Canada, and the Celeya plant in Mexico. In addition, the powertrain plants affected include two in Ohio and one in Georgia in the US, one in Canada, and one in Mexico.

Ford was the first of the Detroit-based automakers to issue a statement on its production plans. Following shifts on 19 March, production at the company's US, Canadian, and Mexican manufacturing facilities will be halted, the statement said. The closures will be until 30 March, at a minimum, and during the shutdown, the company will thoroughly clean each facility and boost containment efforts on the COVID-19 virus. On restarting production, Ford says it will work with United Auto Workers (UAW) union leaders in the US in deciding how best to structure the restarting of plant operations and implement new health and safety procedures. In addition, Ford temporarily closed the final assembly building of the Michigan Assembly Plant (MAP) in reaction to an employee having tested positive for the COVID-19 virus and to thoroughly clean and disinfect the building. A similar occurrence happened at Ford's Chicago Assembly Plant on 18 March. People who have had direct contact with the employee are being instructed to self-quarantine, to watch for any symptoms, and to seek medical attention if necessary. According to an Automotive News report, Ford has confirmed that, during the closures, employees with more than one year of seniority will receive about 75% of their pay through a combination of unemployment and supplemental unemployment benefits; temporary workers with less than one year of seniority will be eligible for unemployment benefits.

Fiat Chrysler Automobiles (FCA) issued a statement on 18 March on its North American production plans. FCA will idle production at its plants across North America until 31 March, with the plants being shuttered progressively. However, at the time of writing, FCA has not provided details of when each plant will close. Similar to Ford's actions, and as a result of steps agreed by a joint task-force including representatives of the UAW and the Detroit Three automakers (FCA, Ford, and GM), FCA confirmed it will "put actions into place to facilitate the steps agreed to through the joint task-force set up between the UAW and the automakers... FCA will work to enhance its manufacturing operations to facilitate the changes agreed with the UAW including shift timings, structures and enhanced cleaning protocols." FCA has also stated that it will provide an update on the financial impact of the COVID-19 virus outbreak "when that evaluation is complete". Also with other automakers, FCA will re-evaluate the situation at the end of March, and the closures could be extended. FCA also temporarily closed its plant in Sterling Heights, Michigan, after an employee tested positive for the COVID-19 virus; the worker had not been in the plant for more than a week and is receiving medical care, reports Automotive News. The issue impacted the first and second shifts at the plant on 18 March, with first-shift workers being sent home and second-shift workers being advised not to come in to work.

General Motors (GM) also issued a brief statement on its plans for suspending production. GM said it "will begin a systematic orderly suspension of manufacturing operations in North America due to market conditions and to deep clean facilities and continue to protect people. The suspension will last until at least March 30. Production status will be reevaluated week-to-week after that." GM will suspend operations according to an undisclosed schedule, and "each facility will receive specific instructions from manufacturing leadership". At the time of writing, GM has not reported any of its manufacturing workers testing positive for the COVID-19 virus, although a worker at its Warren Technical Center tested positive on 17 March.

Hyundai Motor America has idled its plant in Montgomery, Alabama, after a worker tested positive for the COVID-19 virus. Hyundai says it will continue to evaluate the situation, but it has not indicated how long the plant will be shut. At the time of writing, there have been no announcements regarding Hyundai affiliate Kia's plant in West Point, Georgia, or Kia's plant in Mexico.

Toyota will temporarily suspend production at all its North American automobile and components plants on 23 and 24 March. Production will resume on 25 March. Toyota will continue to operate service parts depots and vehicle logistical centres.

Nissan North America announced that it will temporarily suspend production at its manufacturing facilities in the US from 20 March to 6 April; however, it made no announcements regarding its Mexican facilities. Nissan has no production facilities in Canada. In a brief statement, Nissan said, "The company is taking this action to boost containment efforts where possible around the COVID-19 coronavirus. Currently, there are no confirmed cases of COVID-19 coronavirus at any Nissan facility. Areas deemed business-essential will operate with enhanced safety measures."

Tesla's manufacturing facility in California has been classified as non-essential by the county of Alameda, where the plant is located. The Alameda county authorities have mandated a "shelter-in-place" order for three weeks starting on 17 March. Media reports suggest that Tesla's plant continues to operate. However, the Los Angeles Times reports that Tesla told the county on 18 March that it has scaled back its workforce to about 2,500 out of the usual 10,000 people, although the specific impact of this on the electric vehicle manufacturer's production is not known. Media reports have concerned various Tesla internal emails on the situation, as well as comments from the county, but at the time of writing, the company has made no public comments.

Volkswagen (VW) has not announced further closures at this time, following a one-day shutdown at its facility in Chattanooga, Tennessee, for a thorough cleaning to help protect against the spread of the COVID-19 virus. However, Automotive News reports that Audi has suspended production at its plant in Mexico, a shutdown that will start on 23 March and run to 13 April. However, according to a Reuters report, Audi of Mexico issued a statement that the suspension was over lack of parts and supply-chain issues. Automotive News also reports that Audi says it is having difficulties in transporting finished goods to destination countries in a timely manner.

Outlook and implications

IHS Markit had expected that auto production in North America was likely to be affected as the situation regarding the COVID-19 virus progressed and automakers have increasingly closed production plants in other countries. IHS Markit is also preparing an Americas auto production tracker amid the COVID-19 virus outbreak, similar to the production tracker posted on 18 March covering the EMEA region.

Along with plants needing to protect workers and assist in containing the spread of the COVID-19 virus, disruptions to production plants' supply chains have been expected to increase on plant closures elsewhere. In addition, automakers' sales are being affected as people restrict their movements. The expected lower demand may cause some automakers to need to adjust production through the year. While shutting down production now is also disruptive as it is reactive and affects output of both fast- and slow-selling vehicles in the same way, it could alleviate some need for reducing production later in the year.

IHS Markit is in the process of revising its sales and production forecasts and is hosting a webinar for light-vehicle sales and production forecast clients on 19 March. IHS Markit is also preparing an Americas production tracker amid the COVID-19 virus outbreak, similar to the one posted on 18 March covering EMEA (mentioned above). IHS Markit has also created a common landing page on Connect for accessing the latest research.

Posted 19 March 2020 by Stephanie Brinley, Principal Automotive Analyst, S&P Global Mobility

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The above article is from AutoIntelligence Daily by IHS Markit. Every working day, AutoIntelligence Daily provides about 30 articles focused on automotive news, events and trends. Get a free trial.



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