Covid-19 brings car production in Europe to a halt

Covid-19 brings car production in Europe to a halt
Business news |
The coronavirus has sent large parts of the European automobile production into a coma. It is unclear how this will affect the electronics supply chain.
By Christoph Hammerschmidt

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On Wednesday afternoon this week, Porsche announced that it will suspend production – initially for two weeks. The sports car manufacturer was thus the last in a series of automotive OEMs to stop production for the time being. The reason in all cases was to protect the workforce from the corona virus. At the same time, the carmakers are also reacting to the slump in demand as a result of the pandemic – because of the virus, customers around the world are hesitating to buy a new car.

Before Porsche, BMW had also announced on Wednesday the suspension of production in its European plants as well as in its factory in Rosslyn (South Africa). BMW plans to halt its assembly lines for four weeks. The day before, Daimler had already ordered a temporary stop of its production in Europe; not only cars, but also the production lines for vans and commercial vehicles will be affected.

Daimler is in good company with this measure. Starting this Thursday, Volkswagen plans to shut down its assembly plants in Germany, Portugal, Slovakia and Spain for an initial period of two weeks. The Spanish VW subsidiary Seat had already ordered this the day before, Audi plans to follow suit until the weekend. Only Skoda will continue production for the time being, albeit on a limited scale.

Toyota is suspending the production of cars in its European plants for an indefinite period of time. Factories in France, UK, Czech Republic, Poland and Turkey are affected. Ford is suspending operations at its production plants in Germany, Romania and Spain for “a few weeks”, it says. Initially until 27 March, the PSA group (Peugeot, Citroen, Opel, Vauxhall) is suspending all its production in France, Spain, Poland, the UK, Portugal and Slovakia. Competitor Renault stops assembly for “a few days”. Fiat Chrysler stops its plants in Italy; Nissan does the same in the UK.

Have we forgotten anyone? Oh yes, Jaguar Land Rover: Magna, the contract manufacturer that among other things, assembles Jaguar’s electric model I-Pace in Austria, is sending its workers on a compulsory break until the end of March. And, finally, Volvo’s production is also affected: While the factory in Gothenburg (Sweden) continues to operate for the time being, the company is closing its production in Ghent (Belgium) for an indefinite period.

In addition to the coronavirus, there is another reason why many manufacturers would not be able to continue production even if they wanted to: In many cases, supplier parts are now missing, because the car manufacturers’ suppliers are also in crisis and have had to interrupt some of their production.

This abrupt standstill of an entire industry also sends shock waves through the supply chain. How are the suppliers to the automotive industry dealing with this? 

According to a report in the Automotive News Europe newspaper, the major tier 1 suppliers Bosch, Continental, Valeo and ZF Friedrichhafen announced on Tuesday afternoon that all their production facilities would continue to operate unchanged. However, all these companies said that these plans would change as soon as their customers, the car manufacturers, reduced their orders.


If you ask in detail, you usually get trivial answers. In many cases, the companies are afraid of giving away something that could have an impact on the stock price. Continental, for example, left an inquiry from eeNews Europe unanswered. According to press reports, however, the company regards the temporary closure of factories as “last resort, implemented only in extreme cases”.

As an unlisted company, Bosch can afford to be more open. In response to a request from eeNews Europe, the company informed that it was currently investigating the situation together with its customers. “At this point in time, we are largely able to maintain production and our supply chains and meet the needs of our customers. This also applies to our semiconductor production,” explained a Bosch spokesman. However, he added that the situation was “dynamic” and could change rapidly.

The lighting and radar specialist Hella reduced its profit targets in a press release as a result of the pandemic. The company also announced that short-time working was being prepared at certain locations.

Semiconductor manufacturers, as tier 2 suppliers to the automotive industry, have also been affected by the production closures. However, they are extremely cautious about the effects of the downstream production stops. NXP, one of the largest chip suppliers to the automotive industry, had already lowered its sales targets by 5% at the beginning of the month because of the corona virus. “We cannot comment at this time beyond our press release issued earlier this month,” a company spokesperson said. STMicroelectronics announced earlier that it keeps on working in Italy despite the massive lockdown in that country.

Renesas, another big player in the automotive electronics arena, makes the following preventive restrictions: “IF eeNews source of information about production stops is NOT based on the companies’ official statements or press releases, our statement will simply be “we would like to refrain from making comments on speculations in the reports”. Well, that the reports about production stops are no speculation should become immediately clear when looking at the media. Thus, Renesas is making a statement on the matter: „As coronavirus situation is changing on a daily basis, we are communicating and confirming the situation at each of our customer. We will continue to closely monitor market trends in our business areas and the operation status of our customers.“ Rensas set up a task force already at the beginning of February to deal with the effects of the virus on production and organize appropriate measures. The priority is to prevent the virus from spreading within the company and to protect employees, business partners and customers. In addition, the situation will be monitored and appropriate measures taken flexibly, the company said.

Infineon, whose delieveries to the automotive industry are also critical for its business, also holds back with comments. “As a matter of principle, we are not commenting on the current order situation,” a spokesperson said. “We are observing the development very closely, a final evaluation is currently still difficult to estimate”. Whether such a statement creates trust is left to the reader.

But there is also good news – from China of all places, where the pandemic originated, the situation seems to be gradually changing for the better. There, Beijing Hyundai, Hyundai’s Chinese joint venture with BAIC Motor, has resumed operations at its three production sites after the corona virus outbreak.

 

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