With the freeze on new automobile supplies from Korea and China, compounded by the situation that all auto makers have limited stocks that are blocked for customers for the next three months, there are very strong indications that, there is no definite timeline as to when the industry will come out of the woods as the Coronavirus infection spreads.
Automotive is a capital intensive industry that attempts to operate without major stockpiles of parts, making it especially vulnerable to the coronavirus’ spread beyond China.
One twist in the supply chain can cause widespread disruption and can quickly cost millions or billions in lost production, which is why auto companies are hastily searching to find alternative solutions to avoid irreparable catastrophy.
In what is best described as a global emergency, automakers are scrambling to find spare parts and prevent shortages in their supply chains as the spread of the coronavirus rattles markets and threatens to shake the manufacturing processes globally.
The first production plants outside of China to be impacted by parts shortages were in Japan and South Korea where the operations of Nissan, Hyundai, Kia and GM had to temporarily shut down.
General Motors identified a potential parts shortage and airlifting supplies for its truck production, according to United Auto Workers officials. A company spokesman declined to comment on specifics, but confirmed the plants are operating as normal.
While Fiat Chrysler has said it is seeking alternative suppliers, others like Toyota Motor auto suppliers; Dana and Aptiv have established teams task forces and war rooms to closely monitor the COVID-19 epidemic.
“Everyone right now is working hard and scrambling to figure out optionality and assessing the risk on which parts are at highest risk,” said Razat Gaurav, CEO of supply chain analytics firm Llamasoft.
Moody’s Investor Service cut its global vehicle sales forecast earlier this week to be down 2.5 percent in 2020 instead of from 9 percent drop due to the coronavirus.
COVID-19 has taken its toll on automotive stocks forcing both GM and Ford Motor shares down double digits this year, including roughly 12 percent declines since last week and share of Tesla, which are up 59.7 percent this year falling 25.9 percent since February 21.
World Health Organization declared the COVID-19 a global health emergency last month. The virus has spread substantially beyond China and is now confirmed in at least 37 countries across the world with over 85,000 confirmed cases and at least 2,933 deaths.
It also has caused financial markets globally to plummet this week, including the Dow falling more than 12 percent being its biggest weekly percentage loss since 2008, The S&P 500 declined 11.5 percent and Nasdaq dropped 10.5 percent as at last week.
Geneva International Motor Show (GIMS) scheduled to start tomorrow was canceled over the weekend following the coronavirus outbreak that is quickly spreading across the world.
“This comes as a precautatative measure in response to the coronavirus epidemic raging in Europe and now in Switzerland,” Maurice Turrettini, chairman of the board that runs the Geneva auto show, said in a video posted on the organization’s website.
GIMS was canceled after Switzerland announced that it was banning events expected to draw more than 1,000 people to curb the COVID-19 epidemic from spreading.
“We regret this situation, but the health of all participants is our and our exhibitors’ top priority. This is a case of force majeure and a tremendous loss for the manufacturers who have invested massively in their presence in Geneva. However, we are convinced that they will understand this decision. ,” Turrettini said”
As precautionary measure, automaker like BMW, Porsche Bentley have decalred that, they are debuting their hottest new cars online after organizers of the Geneva International Motor Show canceled the 11-day event that lasts from May 5-15.
Automakers around the globe are as a matter of strategy and convention uses global autoshows to unveil new products and generate attention for the company and vehicles.
MIKE OCHONMA
