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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, MBA, Principal Automotive Analyst, IHS Markit
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