Uncertainty looms for Southeast Michigan auto suppliers as the deadly coronavirus outbreak in China continues to halt production.
Factories across China have been shut down since Jan. 24, the start of the Lunar New Year, but most have remained closed past the Feb 2. restart date due to the fast-spreading virus that has claimed at least 630 people and infected nearly 32,000 in 25 countries. The Chinese government installed a mandatory quarantine of more than 60 million people in 14 of China's 23 provinces — factories in these provinces cover 80 percent of the country's exports.
Luckily for U.S. auto suppliers, parts from mainland China were on freighters crossing the Pacific Ocean prior to the Jan. 24 shutdown. But those ships will reach the U.S. West Coast in a matter of days and fears are building that parts shortages are on the horizon, leading to a global auto production slowdown.
"As of now, the quarantine hasn't been that long," said Peter Nagl, senior analyst in the automotive economics group at Southfield-based research firm IHS Markit. "A slowdown won't likely occur unless this lingers into March. Right now everyone is more worrying about the impact than feeling it."
As of Feb. 7, the Chinese government said it would allow factories to resume production on Sunday, Feb. 9. But automakers are already taking it upon themselves to idle production longer. Toyota, Hyundai Motors and Kia Motors said they won't resume production until Feb. 17. Honda will reopen on Feb. 14.
Ford Motor Co. plans to "re-start production gradually at our facilities beginning Monday, February 10, and continue to ramp up production over the following weeks," Anderson Chan, Ford's multicultural communications manager, said in an email. "This plan will be dependent on compliance with relevant government regulations."
However, if the Chinese government decides to extend the quarantine over the weekend, those plans could change again.
Fiat Chrysler Automobiles NV said a European plant could be forced to shut down at the end of February or in early March if it can't get parts from China.
Northville-based automotive thermal-management system supplier Gentherm plans to reopen its four facilities in China on Monday, the company told Crain's in a statement.
"At this time, with the extension of the Chinese Spring Festival by Chinese officials, it will take us additional time to fully assess the impact of the coronavirus to Gentherm," the company said in an emailed statement. "When our employees return to work on February 10 ... we will have enhanced disinfection, ventilation and screening measures for employee health and safety."
Auburn Hills-based BorgWarner Inc., which operates plants in Beijing, Dailan, Ningbo, Taicang, Jingzhou City, Tianjin and Wuhan — the epicenter of the outbreak — and a technical center in Shanghai, won't commit to a specific reopening date.
"The local government regulations are still fluid as to reopen dates regionally and we are following the guidelines they are setting forward," Michelle Collins, director of public relations and marketing, said in an email.
Plymouth-based Adient plc also plans to reopen on Monday. CEO Doug DelGrosso told investors on Jan. 31 that the company is assessing impact.
"In addition, we formed a global response team to ensure a coordinated contingency plan is in place, proactively monitoring any impact related to customers, suppliers and joint venture relationship," DelGrosso told investors. "Prior to any estimate on specific impact to Adient's business, it's too early to forecast. We are working with our customers and suppliers to remain aware of and connected to their efforts and the outbreak continues as more details and information become available, we will provide updates as appropriate."
Most suppliers, however, are remaining quiet about potential impact as health officials work to contain the virus.
Lear Corp., which operates at 17 locations in China including one in Wuhan, declined to comment.
Auburn Hills-based TI Fluid Systems also declined to comment. The tank and fluid management system maker has 13 operations in China, including one in Wuhan.
Coronavirus already is expected to make a dent in production and harm sales, Matt Tsien, presidnent of General Motors China, told investors last week.
"In terms of the impact on sales, there will be I believe a near-term impact on the overall industry," he said. "Fundamentally, dealerships have been closed for the Lunar New Year. In some regions, they're slowly ramping back up. In many other regions, they still remain closed. So we expect that there will be an impact on volume in the near term. Generally speaking as the crisis passes there will be some pent-up demand. So there will be probably some bounce on the other side of it. But in terms of predicting what the overall impact of it would be to our equity income, I think it's a little bit too early to sort of make that call. We obviously do the very best we can to get our operations started up when they could be started up and to manage our costs and expenses, to maximize our outcome."
If the virus continues is not contained and continues to ravage businesses' ability to operate, the outcomes become bleak.
Southfield-based IHS Markit predicts the Chinese auto market could be idled into March, which would knock about 1.7 million units off production schedules and cost the industry billions.
Nagl said continued outbreaks like this coronavirus could amplify the industry's current efforts to move production from China to other low-cost nations in Asia.
"We've seen 18 months of trade tensions between the U.S. and China," Nagl said. "Automakers and suppliers are already diversifying out of China. The only reason some are lingering are because China may have economies of scale or expertise on a part."
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Coronavirus impact remains unknown as auto industry prepares for worst - Crain's Detroit Business
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