DETROIT -- The threat from the coronavirus crisis is closing in on the global auto industry, with Volkswagen Group postponing plans to restart output at most China plants at its joint venture with SAIC Motor and a Tianjin plant with FAW Group until Feb. 17.
One manufacturing plant Volkswagen operates with SAIC in Shanghai and most of the factories under a FAW joint venture will restart on Feb. 10, the German automaker said in an emailed statement Saturday.
Volkswagen, the biggest foreign automaker in China, said it was facing supply chain challenges as businesses resume operations after the country's extended Lunar New Year holiday, as well as limited travel options for employees.
Fiat Chrysler Automobiles warned Thursday that a European plant could shut down within two to four weeks if Chinese parts suppliers cannot resume operations, due to travel bans.
French carmaker Renault said on Friday its South Korean subsidiary RSM would suspend production in Busan for four days beginning Feb. 11 due to supply chain disruptions in China.
"Because of its geographical proximity, the Busan plant is the site that is most exposed to supply disruptions in China," a Renault spokeswoman told Reuters.
She said Renault and alliance partner Nissan are working closely on the supply disruptions because the Busan unit produces the Rogue crossover, one of Nissan's top-selling vehicles.
Renault extended on Monday the shutdown of a factory in Wuhan, China, until Feb. 13, in line with the Chinese government's guidance following the virus outbreak.
Meanwhile, Toyota Motor Corp. and Honda Motor Co. are among carmakers extending shutdowns at China plants as the country steps up measures to fight the deadly coronavirus.
Toyota, which initially halted its Chinese plants until Feb. 9, said it now plans to resume production as soon as Feb. 17. Honda said it will reopen its factory on Feb. 14 with an eye toward restarting output during the week of Feb. 17.
South Korea's Hyundai Motor and affiliate Kia Motors also said on Friday that they plan to restart production at their Chinese factories on Feb. 17, from a previously planned Feb.9.
"We will take preventive measures against infection at factories," a spokeswoman said.
The coronavirus outbreak could reduce Chinese automotive sales and production by 3 percent to 5 percent this year, if the epidemic continues into the second quarter, auto consultant LMC Automotive said on Friday.
The epidemic is "damaging consumer confidence, delaying purchasing, and impacting China's consumer economy which accounts for more than half of the country's gross domestic product," LMC Automotive said in a statement.
"In this scenario, China's GDP growth rate would drop towards 5 percent for 2020."
This could potentially disrupt the North American auto industry as well, as the local automotive supply chain would be affected, with a number of suppliers delaying post-holiday production, LMC Automotive said.
More headwinds
The shutdowns compound the headwinds for automakers in the world’s largest car market, which was already headed for an unprecedented third straight annual decline before the virus started spreading.
The next few weeks will be critical.
Parts made in China are used in millions of vehicles assembled elsewhere, and China's Hubei province, epicenter of the coronavirus outbreak, is a major hub for vehicle parts production and shipments.
Industry experts said suppliers had built up a cushion of parts in inventory and in-transit ahead of the long Chinese New Year holiday in late January. Those will 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 Feb. 9. 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 CEO Mike Manley said Thursday the automaker could be forced to suspend production at a European assembly plant if parts do not begin to flow within two to four weeks. He did not identify the plant or vehicles at risk.
Parts shortages
Hyundai said 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 they are monitoring the risks.
Toyota purchasing chief Masayoshi Shirayanagi said the automaker is "looking very closely at inventories of components" outside China.
General Motors has teams working around the clock to head off trouble, the automaker's CFO said.
Suzuki said it was looking into the possibility of procuring "made in China" car parts from outside Wuhan. Suzuki does not produce or sell any cars in China, but procures some components there for its plants in India, where it controls around half of the passenger vehicle market via its local unit Maruti Suzuki India.
AlixPartners' Hearsch said automakers are more likely than in the past to have backup sources of critical parts. They and their major suppliers took steps after the deadly 2011 tsunami that crippled key suppliers in Japan to reduce the risk that a catastrophe at a single factory could shut down assembly lines.
Flexible manufacturing equipment can also be reprogrammed or relocated to produce parts. When a fire at a Michigan supplier plant threatened production of Ford'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 idled into March, 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.
