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Writing Editor |? Old Driver
Since mid-March, the new coronavirus outbreak has begun to strain the nerves of the European and American auto industries.
According to incomplete statistics from Route, as of March 25, 12 overseas car companies, including General Motors, Ford, Volkswagen, Fiat Chrysler Group (FCA), Peugeot Citroen Group (PSA) and others, have shut down or plan to shut down more than 100 factories. Even Musk, the strongman who believes that "panic over the new crown virus is stupid," had to announce on the 23rd that Tesla would shut down some of its U.S. factories.
In fact, this epidemic caused by the "black swan event" has evolved into the global automotive industry "gray rhino", not only let the 90-year-old Warren Buffett has experienced four consecutive U.S. stock meltdowns, but also evoked the 2008 financial crisis on the automotive industry caused a huge impact on the industry. The financial crisis for the auto industry caused a huge impact on the memory.
So what difficulties did foreign automakers suffer under the epidemic impact? How are they coping and where will the auto industry go in 2020?
Global automakers enter production standby mode
As the new coronavirus outbreak sweeps across the United States, Detroit's Big Three automakers are planning to temporarily shut down all of their U.S. plants starting in mid-March.
Ford said it plans to close plants in the U.S., Canada and Mexico by March 30 and will work closely with the United Auto Workers (UAW) in the coming weeks to restart plants and do what it can to prevent the spread of the virus.?
"We will continue to work closely with union leaders, especially the UAW, to find ways to protect the health and safety of our employees while we look for solutions to meet order deliveries," said Kumar?Galhotra, president of Ford North America.
On March 23, Ford said its operations in Europe, India, Vietnam, Thailand and South Africa would be closed for at least a few weeks. Mark?Ovenden, president of Ford's International Markets Group, said in a statement, "The health and safety of our employees, dealers, customers, partners and communities is our highest priority."
GM said it would close all North American plants by March 30 at the latest, and thereafter would conduct weekly assessments of whether to return to work.? GM Chairman and CEO Mary?Barra said, "We have agreed to a systematic and orderly cessation of production to help fight the new coronavirus."
"By the end of March, the company will phase out production at plants across North America." Fiat Chrysler said it will reassess the situation at the end of this phase of plant closures, and in the meantime will work closely with the UAW to create safe working conditions by, among other things, setting shift times and enhancing cleaning protocols.?
The data show that the U.S. car companies' plant closures will affect 25 assembly plants and 150,000 unionized workers. Of those, GM has 11 plants, followed by Ford's eight and Fiat Chrysler's six.?
In addition, Honda North America announced that it has closed four U.S. plants beginning March 23 due to an expected drop in market demand. Honda said in a statement that the company will shut down production for six days and plans to resume production by the end of the month. Volkswagen, for its part, confirmed that employees at the company's Chattanooga, Tennessee, plant have been given a week's paid vacation.
Tesla, which has previously taken a hard line in the face of the outbreak, even defying advice from local authorities, also issued a statement on March 23 about closing some of its plants. "We have decided to temporarily stop production at our Fremont plant starting March 23, while production, deliveries and after-sales service will continue normally at our Nevada Superfactory."
Meanwhile, European automakers have also begun closing locally based manufacturing plants as the spread of the new coronavirus outbreak accelerates in Europe.
French automaker PSA said it has halted production activities at more than a dozen European plants, including those in France, Germany, Portugal, the U.K., Slovakia and Spain. Fiat Chrysler also announced it would halt production at most of its European plants, including those in Italy, Serbia and Poland. It's unclear how many of FCA's 23 plants will continue to operate.
It's worth noting that the two companies in question are still in the process of merging.
"Despite the disruption in market demand, the company is working with its supply base and business partners to enable our manufacturing operations to return to previously planned production levels as soon as possible." In a press release, FCA said it plans to take steps to restart manufacturing "as soon as it is ready."
On March 15, Ferrari announced it was temporarily halting production at its Maranello and Modena plants in Italy, and its current plan is to return to production status on March 27th.
Ferrari also noted that it was no longer permitted to continue production because it was experiencing "the first serious supply chain problems."? Also, Ferrari Racing has suspended its operations. Meanwhile, prior to the suspension, Ferrari had already announced plans for related layoffs.
In the U.K. market, Aston Martin said the company's production shutdown is scheduled to last until April 20, but that it will continue to assess the situation and "will resume operations as soon as reasonably possible."
Additionally, Bentley, MINI, Rolls-Royce, Nissan, Jaguar Land Rover, Toyota, and Honda are among the car companies that have suspended car production in the U.K. because of the spread of the outbreak.
In the German market, BMW announced that it has begun closing its dealerships and factories, with factory shutdowns planned through mid-April, and production will be adjusted to meet demand.? BMW said in a statement, "As with many other commodities, the demand for cars will be significantly reduced."
Porsche Cars also announced that it had begun a two-week plant shutdown on March 21, a decision that will affect its two plants in Zuffenhausen and Leipzig, Germany.
Most of Volkswagen's plants in Europe have been shut down since last week, according to the Wall Street Journal. "2020 is going to be a very tough year. The pandemic presents us with unknown business and financial challenges." Volkswagen Group Chairman of the Board of Management Herbert? Diess (Herbert?Diess) said previously.
Emergency switch to medical equipment production
Across the world, the automotive industry is crossing over to produce respirators and other medical equipment to combat the new coronavirus outbreak.
Last week, the Trump administration said it would invoke the National Defense Production Act, passed during the Korean War, to prod industrial manufacturers to produce supplies needed to fight the epidemic in an emergency. For the auto industry, the plan would be to require automakers to start producing ventilators and any other equipment needed by hospitals.
In this situation, Ford announced a partnership with 3M? that began using the F-150's seat-cooling system to make medical ventilators. Ford is also working with GE?Healthcare to produce a simplified version of the GE respirator. On top of that, Ford is also producing masks. As of today, Ford has supplied more than 100,000 masks to healthcare workers.
General Motors and Ventec?Life?Systems, are working together to make 200,000 emergency care respirators at the General Electronics Manufacturing plant in Kokomo, Indiana, according to the New York Times. GM says 95 percent of the parts needed are now in place.
While Tesla didn't immediately turn to ventilator production, Musk said he purchased 1,255 ventilators from China and donated them to medical personnel in Los Angeles. He argued that "there's an oversupply of ventilators in China."
On March 24, Fiat Chrysler (FCA) CEO?Mike?Manley said it would use one of its car factories in China to produce masks at a rate of 1 million per month, according to foreign media reports.
And in the UK, Prime Minister Boris?Johnson has opened a conversation on March 16 with carmakers and engineering firms such as Ford, Honda, Rolls-Royce and JCB about whether their production lines could be used to make medical devices. It is understood that only 5,000 ventilators are available for use in UK hospitals.
The latest news shows that the major UK car companies have said they are willing to support the production of the ventilators that are most needed today. But according to the FT, the discussion between the government and the car companies is about whether there is enough production space to accommodate new customized lines of medical equipment, rather than repurposing and converting existing lines.
In addition, Volkswagen's chief executive, Herbert Diess, said the company has begun building production capacity for protective masks in China and is supplying temperature-measuring equipment, masks, sterilizers, and diagnostic equipment to German authorities.
In Italy, Ferrari and Fiat Chrysler are negotiating with Siare?Engineering, the country's largest respirator maker, to help boost production of respirators.
Bankruptcy, merger or plunge?
A few days ago, Royal Bank of Canada Capital Markets (?RBC?Capital?Markets) predicted, "from a demand perspective," that the impact of the new coronavirus outbreak could cause global auto production to fall by 16% in 2020, while U.S. auto sales are expected to fall by Meanwhile, retail sales in China, the largest auto market so far this year, have been cut in half.
More than one consulting firm has taken a similar view. Morgan Stanley issued a report predicting a 9 percent drop in auto sales by 2020. Analysts wrote that a "demand shock" triggered by the spread of the virus could cause consumers to delay purchases of big-ticket items such as new pickup trucks, SUVs, and crossovers.
Morgan Stanley predicted that U.S. auto sales could fall from 17.1 million in 2019 to 15.5 million. And LMC forecasts that U.S. light vehicle sales will be revised downward from 16.8 million to 16.5 million in 2020.
Kristin?Dziczek of the Center for Automotive Research in Ann Arbor, Michigan, said a one-week halt in car sales in the U.S. would have a huge ripple effect on the economy, with sales plummeting.
For every week of lost car sales, the entire market loses about 94,400 jobs and $7.3 billion in revenue, according to the center.
So the ensuing shutdowns could create an immediate cash crunch for automakers as demand for cars falls during the new coronavirus outbreak.?
In such a format, GM said it will borrow $16 billion from its existing line of credit and double its cash reserves to ensure that GM maintains financial flexibility in an uncertain global market.
GM CEO Mary Borah said in a statement: ? "We are aggressively pursuing austerity measures to preserve our cash reserves and taking the necessary initiatives to manage our liquidity and ensure that our business can continue to grow, thereby protecting our customers and stakeholders." ?
Meanwhile, Ford also chose last week to suspend its cash dividend and borrow an additional $15.4 billion to maximize the use of its credit lines.
Taken together, U.S. auto suppliers have begun to become relatively more risk-averse after the bankruptcy lessons of the 2008 financial crisis. As a result, the odds are that GM and Chrysler will not go the way of bankruptcy in this relatively less severe epidemic crisis, and Ford will no longer falter.
But at the critical juncture of the auto industry's transformation and the urgent need for mass production of some of its heavy hitters, the temporary halt in sales and the relative tightening of cash flow will impact the transformation plans of many international car companies, including those in the United States.
"If the car company shutdown continues around April, small-scale parts and components companies may deteriorate their cash flow." A Japanese executive of a large auto parts company said. He was reminded of the grim situation that arose after the Lehman Brothers incident in 2008, when listed large parts and components companies went into the red one after another, while some unlisted small and medium-sized enterprises experienced cash flow difficulties.
It is conceivable that the longer the shutdown, the greater the pressure on small-scale parts and components companies, which will be forced to make adjustments to their business strategies, including reorganization. Therefore, due to the shrinking cash flow, the reorganization between small and medium-sized parts and components enterprises in 2020, the probability will become more active.
For Chinese car companies, although the international market is in the midst of the storm, but now the most urgent task, or resume production, restore sales and service and other daily order, and can not indulge in fantasies "foreign capital back, independent into", this is the zero-sum game of the long dream.
In February, Honda's sales in China fell 85%, Toyota fell 70%, Volkswagen fell 91%, General Motors fell 92%, but in a relatively deeper market base, these multinational giants to restore the efficiency of the independent brand will be faster.
And, during the epidemic, global automakers learned from the ways and means of Chinese automakers to control the epidemic, rather than the unique technologies of R&D and manufacturing, so the gap between the two did not narrow substantially.
So it seems, fantasizing about taking advantage of the epidemic to catch up with Europe and the United States car people, you can wash your hands of it, not as good as in the appropriate time to go to sea to plunge into the high-quality companies to be sold, seems more real.
This article comes from the author of the automobile home car family number, does not represent the views of the automobile home position.