Global Auto Industry Impacted by Virus

The three companies and the UAW are coordinating efforts to prevent the spread of the virus. New measures include enhanced visitor screening, increased cleaning and sanitizing of common areas and touch points, and implementing safety protocols for people with potential exposure

The joint task force’s areas of focus will include vehicle production plans, additional social distancing, break and cleaning schedules, health and safety education, health screening, food service and any other areas that have the potential to improve protections for employees. As the joint task force identifies enhancements, each company, together with the UAW, will provide regular updates to the workers in their facilities.

“Workplace health and safety is a priority for us every day. All three companies have been taking steps to keep the COVID-19/coronavirus out of their facilities, and during this national emergency we will do even more working together,” said UAW President Rory Gamble. “We are focused on doing the right thing for our people, their families, our communities and the country. All options related to protecting against exposure to the virus are on the table.”

Automakers Suspend Production in Europe

Numerous automakers are suspending production in Europe and the UK due to the coronavirus.

FCA will halt production through March 27 at facilities in Italy, Serbia and Poland. Ford closed its plant in Valencia, Spain, after reporting three positive cases of the virus in a 24-hour period.

Renault-Nissan has shut down production at factories in Spain. Ferrari closed two plants in Italy for the remainder of the month. PSA Group, which owns Peugeot and Citroen, shut down 15 factories in seven countries, including the UK, until the end of March. A 14-day employee quarantine was called for by Czech unions at Volkswagen’s Skoda Auto and Hyundai Motor Company.

Volkswagen announced Tuesday that it will halt production at its plants in Europe, following the lead of its European rivals. Volkswagen is the largest manufacturer with 72 production plants in Europe and 124 plants worldwide.

“The spread of coronavirus is currently impacting the global economy. It is uncertain how severely or for how long this will also affect the Volkswagen Group,” said Volkswagen CFO Frank Witter in a statement Tuesday. “Currently, it is almost impossible to make a reliable forecast. We are making full use of all measures in task force mode to support our employees and their families and to stabilize our business.”

Research Firms Cut Global Sales Forecast

Research firm LMC Automotive says the COVID-19 outbreak has had a “rippling impact” on vehicle sales. LMC cut its 2020 global forecast for light-duty vehicle sales by 4 percent or 3.7 million units.

“The impact of COVID-19 on the auto industry has gone well beyond the initial focal point of China, resulting in downward forecast revisions across most major markets,” said Jonathon Poskitt, director of Global Sales Forecasts at LMC, in a release. “We are still in the early stages of understanding the full impact, but expect it to get worse before it gets better.”

Moody’s Investor Service dropped its forecast by 2.5 percent from its earlier prediction of 0.9 percent.

Global auto production is likely to fall 16 percent in 2020, says RBC Capital Markets, driven in part by a 20 percent plummet in U.S. sales.

U.S. Forecast to Depend on Length of Pandemic

TrueCar subsidiary ALG says a range of projections is needed for U.S. auto forecasts based on “macro-economic impacts from the coronavirus outbreak.”

“A quick recovery by the end of April would lead to roughly half a million lost sales, while a prolonged slowdown through the end of the year would result in a nearly 15 percent year-over-year sales decline in 2020. While forecasts are changing day to day, our current likely scenario has new vehicle sales for 2020 landing in the mid 15M unit range,” said Eric Lyman, ALG chief industry analyst.

March auto sales are expected to be dismal as the pandemic takes hold in the U.S. and tighter restrictions are placed on U.S. citizen activity.

“Even if dealerships remain open, the pandemic scare will indeed slow down footfall and auto sales,” says Rimmi Singhi at Zacks. “Apart from dampened consumer sentiments and lower vehicle demand, the industry is also likely to suffer from supply chain issues, if the situation worsens.”

Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, expects a widespread impact. “I don’t see anybody coming out unscathed,” she told CNBC. Everybody’s going to be impacted. It’s just a question of to what degree and how much they’ve been able to mitigate the risks since we’ve known about this over the last months.”

Dziczek added that new vehicles are a discretionary purchase that consumers can put off during times of economic uncertainty. “Right now, we’re in the very early stages, but there are certain pockets in the U.S. that are heavily impacted, and manufacturing will come to a halt if that spreads.”