The threat from the 2019 novel coronavirus outbreak on Thursday closed in on the global auto industry, as Fiat Chrysler Automobiles NV warned that a European plant could shut down within two to four weeks if Chinese parts suppliers cannot get back to work.
The next several weeks will be critical for automakers. Parts made in China are used in millions of vehicles assembled elsewhere, and China’s Hubei Province, epicenter of the outbreak, is a major hub for vehicle parts production and shipments.
Industry experts have said that auto suppliers had built up a cushion of parts in inventory and in-transit ahead of the Lunar New Year holiday, but those would start to run out if Chinese parts factories cannot get back to work next week, or if flights to and from China remain limited.
Chinese auto parts and assembly plants have extended previously planned New Year’s shutdowns through Monday next week, but some have pushed the shutdowns out further.
“Almost everybody has some product where they are in trouble,” said Dan Hearsch, a managing director for the auto and industrial practice of consulting firm AlixPartners.
Fiat Chrysler could be forced to suspend production at a European assembly plant if parts do not begin to arrive within two to four weeks, chief executive officer Mike Manley said on Thursday, without identifying the plant or vehicles at risk.
South Korea’s Hyundai said that shortages of parts from China would force it to suspend production at its South Korean plants.
Other global automakers have not disclosed details about potential disruptions outside China, but have said that they are monitoring the risks.
Toyota operating officer Masayoshi Shirayanagi said that the automaker is “looking very closely at inventories of components” outside China.
GM has teams working around the clock to head off trouble, the automaker’s chief financial officer said.
Automakers are more likely than in the past to have backup sources of critical parts, AlixPartners consultant Hearsch said.
They and their major suppliers took steps after the deadly 2011 tsunami that crippled key auto parts makers in Japan to reduce the risk that a catastrophe at a single factory could shut down assembly lines, Hearsch added.
Flexible manufacturing equipment can also be reprogrammed or relocated to produce parts. When a fire at a Michigan supplier plant threatened production of Ford Motor Co’s high-profit pickup trucks, Ford moved rapidly to relocate production tools to a plant in Ontario.
Still, not all the production from China’s Hubei Province can be easily replaced or moved.
Hubei is one of 11 Chinese provinces that are responsible for more than two-thirds of vehicle production in China, IHS Markit said in a study last week.
If plants remain idle into next month, the production losses within China would become significant, amounting to more than 1.7 million vehicles of lost production during the first quarter, IHS projected.
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