The Coronavirus and the Auto Industry

I was invited to tune in on a webinar presented by the Center for Automotive Research entitled "Coronavirus Update: Disruption and the Impact to the Auto Industry." Two of the speakers covered what impact the latest world health scare has had thus far on the automotive industry; both here and abroad. They hit on some interesting points. As noted, the auto industry is in the “crosshairs” of the Coronavirus which thus far has claimed the lives of over 1,000 people and leaving more than 43,000 people infected (World Health Organization). Numbers, as we all know by now, change daily.

China has been the hardest hit and also has made the most investment in managing their country. Among some of the statistics cited regarding China’s efforts to curb the virus were interesting: At this time, 85 percent of China’s Starbucks (4,292) are open. Wuhan has a surplus of beds, and six million people are back at work in Guangdong, at this time. Of course, these numbers are not up to date as we print them today. It’s almost impossible to get an accurate picture.

Some of the auto plants in China have been closed since the Chinese New Year. Some plants were allowed to open around the middle of February. As other plants remain closed, production is of course, hampered affecting auto suppliers in the U.S.

There are so many ways in which an epidemic like the coronavirus affects the culture, business and individuals. The biggest impact thus far, has been in China where those studying the human impact have reported boredom and anxiety in those who have been quarantined inside. China is dealing with the outbreak in the most extreme way. A sign posted on the streets there reads: “Pay Attention to the 3 No’s: No making up rumors; No spreading rumors; No believing rumors. It’s the biggest way to help in the battle against spread of coronavirus.”

Statistics and situations continue to change, by the hour. While there’s no question, the virus is and has caused a loss of production. One such prediction is that if the plants are still closed until mid-March, there could be a loss of more than 1.7 million units for the first quarter. According to Michael Brady, a partner and co-chair of the Automotive Industry Group at Warner Norcross, talked about the automotive industry based on ‘just-in-time delivery.” In most supply chains, he continued, “some parts were already in transit before the closing of the plants, and parts are trickling in. Original equipment manufacturers such as Ford, GM and Chrysler, have only a handful of parts and assemblies arriving.”

The webinar speakers commented that they do not see the auto industry rebounding. Also at risk are customers not wanting to spend money; rather, holding onto their money; similar to the situation in the early 2000’s. The World Health Organization anticipates that as the virus kicks off in smaller countries, WHO will shift in what they will advise, going from containment to 80 percent of the world’s getting the virus. They are saying to expect uncertainly and to get accustomed to it over the next few months.

In the meantime, auto suppliers are being urged to be transparent with customers, letting them know that the situation in China is impacting production. Keep the lines of communication open and be sure to keep customers informed and updated.
Many remember the SARS virus outbreak, no doubt. Michael Brady believes the Coronavirus is having a greater effect on the global supply chain. It’s hard at this time to estimate how severe the overall impact will be on the auto industry.

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