After shutdowns in China, Europe, the U.S. finally halts its car factories.
The chips are falling. As communities and whole countries go into lockdown, and people are unable to go to work and have stopped buying cars, more auto plants are closing temporarily for both health and economic reasons and that includes key facilities in the U.S.
The initial impact was felt in China, which was the first country to experience the COVID-19 coronavirus, the first to impose quarantines, the first to close plants and the first to see dramatic sales falloffs of about 80 percent for most automakers. China is now restoring production. Next came Europe, and the auto industry there is feeling the pinch. FCA, Ford, Ferrari, Daimler, Lamborghini, and others have idled European operations.
Rolls-Royce Motor Cars said today it will suspend production at its Goodwood plant for two weeks starting March 23, which will be followed by the previously planned two-week Easter shutdown for maintenance. The moves are in keeping with the U.K. government measures to slow the spread of the coronavirus. “This action has not been taken lightly, but the health and well-being of our exceptional workforce is first and foremost in our minds,” said Torsten Müller-Ötvös, CEO of Rolls-Royce, in a statement. “We are a tight-knit community at the Home of Rolls‑Royce and I have no doubt that our resilience will shine through during this extraordinary time.” He also apologized for any inconvenience to customers.
But What’s The Impact Here In The U.S.?
Now it is the U.S. ‘s turn. The United Auto Workers (UAW) union wanted General Motors, Ford, and FCA to shut down their domestic plants for two weeks. The Detroit Three and UAW formed a joint task force to increase safety and health protections for factory employees and help slow the spread of the novel coronavirus. It has been a fast-moving series of decisions. After lengthy negotiations, the automakers initially agreed to rotating partial shutdown of facilities, extensive deep cleaning between shifts, longer periods between shifts, and extensive plans to avoid member contact. “They will be working on shift rotation to minimize risk,” the UAW confirmed Tuesday night.
But by Wednesday afternoon things had escalated further. GM and Ford put out news releases saying they would temporarily suspend manufacturing in North America until at least March 30.
“We have agreed to a systematic, orderly suspension of production to aid in fighting COVID-19/coronavirus,” said GM Chairman and CEO Mary Barra. “We have been taking extraordinary precautions around the world to keep our plant environments safe and recent developments in North America make it clear this is the right thing to do now.” She said she appreciated the teamwork of the UAW “as we take this unprecedented step.” GM will take down the plants in an orderly fashion. Each facility will be told how they fit into the cadence.
Ford will take down its plants in the U.S., Canada, and Mexico, after the end of shifts on Thursday and they will remain down through March 30. Ford closed its Michigan Assembly Plant Wednesday morning after an employee tested positive for the coronavirus.
FCA later chimed in to say it will cease production at North American plants with some closing as early as today. All will be down through the end of March at which point the automaker will re-evaluate. CEO Mike Manley visited a number of plants this week to better gauge the best course of action for employees.
Honda today said it will stop making vehicles in the U.S. for six days, a loss of about 40,000 vehicles that would have been assembled from March 23 to March 31. The action affects vehicle assembly plants as well as engine and transmission plants. Affected plants are in Ohio, Indiana, Alabama, Canada and Mexico, covering a wide swath of models.
Some North American plants have already experienced hiccups with worried workers walking off the job. While most did not impact production, the FCA plant in Windsor, Ontario, stopped making minivans for 24 hours due to a work refusal. Volkswagen closed its Chattanooga plant for a day this week to give it a deep clean and to help employees find child care with many schools closing.
Is Tesla Essential?
Tesla did not stop production at its Fremont, Calif. plant even though six counties in the San Francisco area are under a shelter-at-home order. That prompted the Alameda County sheriff to declare in a tweet that Tesla is not an essential business which means it can “retain minimum basic operations” but could be forced to close some of its operations, including the plant in Fremont that makes the Model S, Model X, Model 3 and Model Y.
Tesla CEO Elon Musk sent an email to employees on Monday saying he would be at work but they do not need to come to work if ill or uncomfortable.
Availability of parts will also determine how long plants can operate. Ford was forced to stop production of the Ford Explorer, Lincoln Aviator, and police vehicles, at its Chicago Assembly Plant for about 24 hours when it could not get enough seats from a Lear plant where two workers tested positive for the virus and the parts plant was closed temporarily.
Dealers are also shutting their doors although some are keeping the service bays open, deeming them an essential service.
The Economic Hit To The Car Industry
A single week of lost auto sales in the U.S. has a huge economic ripple effect, according to Kristin Dziczek, vice president of industry, labor and economics with the Center for Automotive Research in Ann Arbor, Michigan. Sales are expected to fall off dramatically and the Center’s data shows a week of missed sales comes at the cost of about 94,400 jobs and $7.3 billion in earnings.
Most analysts expected U.S. sales to fall slightly in 2020 but now forecasts suggest it could reach double-digits if consumers don’t act on their pent-up demand and buy new cars when the world returns to more normalcy. But the crisis is not expected to be as severe as the financial downturn in 2008-2009 which resulted in bankruptcy filings by both GM and Chrysler, and left Ford teetering on the brink. All automakers made systemic changes to their operations to make them leaner and more productive to better weather future storms.