Automakers Put Brakes On US Production Amid Coronavirus Scare

The coronavirus pandemic has crippled the U.S. auto industry, with closure of factories, dealerships witnessing lower footfall and disruptions in global supply chains. Notably, the number of confirmed coronavirus cases in the United States has crossed 8,700. Acknowledging the gravity of the crisis, President Trump has issued new guidelines to contain the spread of the pandemic. The pandemic is likely to take a severe toll on sales and earnings of automakers in the days to come.

U.S. Automakers Take Precautionary Measures

Various auto companies having operations in the United States have temporarily suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nation-wide campaign addressing the crisis. The companies have implemented more stringent cleaning regimens, imposed restrictions on access to the plants and taken other steps to keep workplaces safe for employees. Other measures to contain the spread of the virus include allowing some employees to work from home and controlling numbers at company cafeterias.

The coronavirus outbreak is posing concerns for auto biggies, including General Motors (NYSE:GM) , Ford (NYSE:F) , Fiat Chrysler (NYSE:F) , Tesla (NASDAQ:TSLA) , Honda Motor (NYSE:HMC) , Toyota Motor (NYSE:TM) , Volkswagen (DE:VOWG_p) AG (OTC:VWAGY) , Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor, all of which have large manufacturing plants in the United States.

General Motors and Fiat Chrysler have temporarily shut all U.S. factories at least until Mar 30 to contain the spread of coronavirus and will evaluate the situation on a weekly basis after that.

Ford has also temporarily halted production at its Chicago assembly plant due to shortage of parts. The plant will be idled for at least two shifts. The closure is related to the COVID-19 cases that caused suspension of work at Lear Corporation’s plant in Hammond, which supplies seats for the Ford Explorer sport utility vehicle and other vehicles manufactured at Ford’s Chicago Plant.

All three automakers have bowed to pressure from the United Auto Workers (UAW) union that has called for protection from the pandemic in order to safeguard its members, families and communities.

Meanwhile, Honda North America will be closing four U.S.-based plants from Mar 23, due to an anticipated decline in market demand. The company will suspend production for six days, with plans to return by the end of March. The hiatus is likely to reduce production by approximately 40,000 vehicles. The affected plants include vehicle production plants in Ohio, Illinois, Alabama and Indiana. Transmission and engines plants are also part of the production suspension.

Per BBC News, Tesla's main factory in California has commenced a three-week lockdown to curb the spread of the virus. This will affect production ramp-up plans of the Model Y electric vehicle, for which the company had been projecting high demand. Tesla currently carries a Zacks Rank #3 (Hold). You can see Zacks Investment Research

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Written By: Zacks Investment Research