Coronavirus Creates Domino Effect in Global Automotive Supply Chain
February 14 2020 - 2:28PM
Dow Jones News
By Ben Foldy in Detroit and Eric Sylvers in Milan
Fiat Chrysler Automobiles NV said it is temporarily halting
production at a car factory in Serbia because it can't get parts
from China, a sign of how the coronavirus outbreak is creating a
domino effect in a straining global supply chain.
At the same time, union officials at two major General Motors
Co. factories in the U.S. are warning more production outages could
come as certain parts at SUV and truck plants in Michigan and Texas
run low.
Fiat Chrysler's planned shutdown next week at a factory in
Kragujevac, Serbia, is the first publicly disclosed closure of a
large car plant outside of Asia. Shortages of China-made parts have
already begun to ripple through the global automotive supply chain,
leading Hyundai Motor Co. and France's Renault SA to temporarily
idle some assembly lines in South Korea. Nissan Motor Co. has had
to adjust production at some of its plants in Japan because of
problems getting parts from China.
Fiat Chrysler said it was moving up a planned shutdown
previously planned for later in the month at the factory, which
makes the Fiat 500L sedan. The factory, Fiat Chrysler's only one
making the 500L, has more than 2,000 employees. That stoppage had
been scheduled to adjust production to slumping demand. The company
said it didn't expect the change in scheduling will impact its
total monthly production. Fiat Chrysler said it is working to get
the parts, which it declined to identify, from other suppliers. It
declined to comment further.
Closer to home, a factory in Flint, Mich., which makes
heavy-duty versions of GM's Chevrolet Silverado and GMC Sierra
pickup trucks, faces shortages of at least two parts sourced from
China, said Chad Fabbro, a financial secretary at the United Auto
Workers' local representing workers at the plant. In Arlington,
Texas, GM's assembly plant is confronting the possibility of
running out of certain parts from China, said Terry Valenzuela,
president of UAW's local chapter. The situation remains fluid, he
said. That factory makes Cadillac Escalades and Chevrolet
Suburbans.
GM said it doesn't anticipate an impact on truck production for
now. "We continue to monitor our supply chain and are in close
communications with our Tier One suppliers to mitigate any risk to
production in North America," the company said in a statement.
"The car industry is in a supply chain twilight zone right now,"
said Warren Browne, a former car industry executive who now works
as a consultant. "If you know it's going to last six or seven
months you start moving production around. If it's going to be six
weeks you don't move anything because it's not worth the
trouble."
The outbreak of the disease that health authorities are now
calling Covid-19 led China's government to impose extended
shutdowns of manufacturing plants throughout the country after the
traditional break for the Lunar New Year holiday, in hopes of
slowing the disease's spread.
Many auto companies said they planned to restart plants in China
this week. It is unclear how many have. Analysts say the impact of
supply-chain disruptions and worker quarantines make it difficult
to anticipate when production will return to normal.
The outbreak has halted assembly lines at several car plants in
China, and forecasters at LMC Automotive expect the outbreak to
depress Chinese auto production by around 1.2 million cars this
quarter. Last year, GM produced nearly 640,000 cars -- nearly 40%
of its Chinese production -- in Hubei province, the origin of the
outbreak where most of the infections have been diagnosed, LMC
Automotive said.
The factory in Flint is one of GM's largest U.S. factories,
employing about 5,000 workers. The plant would likely run out of
decals and vents first, both of which can be installed after a
near-finished truck rolls off the assembly line, Mr. Fabbro said.
But longer delays could impact more critical components, he
said.
"This is going to be a day-by-day monitoring thing," he said.
"If it goes six weeks, then we all have bigger problems."
GM has arranged for parts to be flown by chartered jet from
China when parts are available, he said. A GM spokesman declined to
comment.
GM derives the majority of its global profit from sales of its
large pickup-truck and SUV models built in North America. The
pickups are built at the Flint factory, along with a plant in Fort
Wayne, Ind., and another in Silao, Mexico. The Arlington plant
makes all of GM's large SUVs.
The company already is trying to replenish truck stocks after a
40-day strike last fall shut down production across its U.S.
factories.
Mike Colias contributed to this article.
Write to Ben Foldy at Ben.Foldy@wsj.com and Eric Sylvers at
eric.sylvers@wsj.com
(END) Dow Jones Newswires
February 14, 2020 15:13 ET (20:13 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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