The commercial vehicles and automotive industry enters April under arguably the most pressure since the Second World War – and certainly the oil crisis of the 1970s.
The industry has blossomed in the intervening decades as a major beneficiary of the globalisation; making it possible to place plants across the world and plugging into a vast network of factories and suppliers. This has allowed many brands to ride out the booms and busts of economies and extend their reach into fleets working in every corner of the globe.
The emergence of the Coronavirus at the beginning of the year (see page 36) is a considerable challenge in the short term; shutting down whole sections of their supply chains and freezing what had been promising progress in 2019. The ongoing Chinese and US trade battle may have been causing uncertainty before but now there is real concern that a global recession good emerge; even if the disruption caused by COVID-19 is only for a few months (albeit that seems unlikely as T&FME goes to press – Ed).
The virus started in the automotive heartland of China and it is of short coincidence that it has hit in Europe’s manufacturing centres, particularly in Italy which has suffered more than most countries. Germany and France, home to brands such as Daimler, MAN Truck & Bus and Renault, have consequently brought in draconian measures not seen for 80 years with borders closing and the movements of people under close scrutiny.
By the middle of the month, the European Automobile Manufacturers’ Association (ACEA) was describing the effect of the coronavirus on society and the global economy as unprecedented, “with grave consequences for the automobile industry. Indeed, most of the members have already announced temporary closures of plants due to collapsing demand, supply shortages, and government measures, and are facing cases of corona infections and quarantines among their employees.”
Eric-Mark Huitema, ACEA’s Director General says it is clear that this is the worst crisis ever to impact the automotive industry.
“With all manufacturing coming to a standstill and the retail network effectively closed, the jobs of some 14 million Europeans are now at stake,” he said. “We call for strong and coordinated actions at national and EU level to provide immediate liquidity support for automobile companies, their suppliers and dealers.”
While Huitema welcomed policy measures undertaken by European governments to offer financial support to businesses and their workforces, he reached out to the European Commission asking for urgent dialogue and new measures to protect the automotive industry on the continent.
“We now need an urgent dialogue with the President of the European Commission to do two things,” he wrote in an open letter.
“Firstly, to take concrete measures to avoid irreversible and fundamental damage to the sector with a permanent loss of jobs, capacity, innovation and research capability. Secondly, Europe should prepare to stimulate the recovery of our sector, which will be a key contributor to the accelerated recovery of the European economy at large. We stand ready to work with the European Commission, national governments and other stakeholders to navigate through this unfolding crisis,” Huitema stressed.
According to the ACEA figures, vehicle manufacturers in the EU operate 229 vehicle assembly and production plants, directly employing 2.6 million Europeans in manufacturing. The wider automotive sector provides indirect and direct jobs for 13.8 million people in the EU.
“The health of those people that are the backbone of our industry, and their families, is paramount to Europe’s automobile manufacturers,” said Huitema.
Huitema and the ACEA believe it is vital to keep the production and supply of spare parts going, as well as vehicle service networks. They argue this is essential “not only for the maintenance of vital logistics”, but also for the work of emergency services like ambulances, firefighters, law enforcement, relief organisations and other public (medical) services.
Huitema added: “The free flow of medicines, food, fuels, equipment and supply parts across the EU must be guaranteed under all circumstances.”
The month of March saw the production of vehicles on Europe systematically shut down on a predominantly short-term basis but with many industry observers expecting it to be weeks or months before factory gates reopen.
Ford, Volkswagen, BMW, SKODA and Nissan had all shut-down by the middle of the month. Daimler also suspended the majority of its production in Europe, as well as work in selected administrative departments, for an initial period of two weeks on 17 March.
“By taking this action, the company is following the recommendations of international, national and local authorities. The suspension applies to Daimler’s car, van and commercial vehicle plants in Europe and will start this week,” explained the company in a statement.
“Connected to this is an assessment of global supply chains, which currently cannot be maintained to their full extent. An extension of this measure will depend on further developments. Wherever operations need to be continued, the company will take appropriate precautions to prevent the infection of its employees.”
With these closures, Daimler – admitting that the economic effects “cannot be adequately determined or reliably quantified” at this time – said it was helping to protect its workforce; to interrupt chains of infection; and to contain the spread of the pandemic: “At the same time, this will help the company to prepare for a period of temporarily lower demand and to protect its financial strength.”
Within Daimler, Mercedes-Benz trucks, FUSO and Daimler Buses “committed to do everything possible” to continue to supply customers with spare parts and maintenance services in – subject to respective legal and official requirements.
“We pursue the clear goal of maintaining our service network across Europe with up to 3,000 centres,” said the company in a second statement released on 24 March.
“Corresponding plans are being drawn up for our own companies and for partner companies. The teams rely on pragmatic and uncomplicated solutions to keep our customers’ vehicles running and supplied with spare parts.”
“Our colleagues in our service facilities make a significant contribution to ensuring our society can cope with the current state of emergency as well as possible, and we therefore thank these everyday heroes from the bottom of our hearts,” added Martin Daum, Chairman of the Board of Management Daimler Truck AG.
“Trucks and buses are particularly important given the current situation. Right now commercial vehicles for transport and logistics must be available to ensure supply and disposal, as well as emergency services. Therefore it is crucial that our service centers remain in operation wherever possible.”
Following suit, Scania initiated a plan to stop operations at most of its European production units on 25 March, citing component shortages and the major disruptions that have occurred in the supplier and logistics chain as a result of the spread of COVID-19 in Europe.
“To ensure our customers’ vitally important transports for society, our service workshops and parts centres will continue their operations,” said Scania’s President and CEO Henrik Henriksson.
Scania had expected to resume production within two weeks in Sweden, the Netherlands and France – with talks ongoing with unions and worker associations on how to navigate through a difficult time for the business and its thousands of workers.
“The management and employee representatives both highly appreciate the state support measures that are now being made available in the countries where our staff now temporarily will lack work,” says Henriksson.
With the spread of the virus in South America considered to be some weeks behind Europe and Asia, Scania’s industrial operations in Latin America, which account for about one-fifth of the company’s production volume, were to continue as planned (as T&FME went to press).
With Scania closing down, it was no surprise to see Volvo Group also announcing that it would put all of its 20,000 staff in Sweden on a short-term, temporary lay off-scheme starting last month and amid a close down of all production in the country because of the outbreak.
“The consequences of the Covid-19 outbreak is affecting the Volvo Group, and there is a considerable risk of a material financial impact on the Group as from mid-March. The Volvo Group and its suppliers are continuously working to minimize any consequences for customers and mitigating the impact on the Group.
“The impact is related to the general situation and decisions made by local authorities resulting in among other things workforce shortage in the production and supply chain disruptions. There is also a potential impact on demand going forward,” said the company in a statement. “Given the uncertain situation, it is not currently possible to predict the full potential impact on the Volvo Group.”
Consequently, production at its large plant in Gothenburg and in Ghent would be stopped, with facilities at subsidiary Renault Trucks in France also temporarily closing.
“We have reached a frame agreement with the Swedish unions about short-term, temporary lay offs of all employees in Sweden,” SVP communications Claes Eliasson remarked. “We of course hope for it to be as short as possible. But we are doing this to protect staff, the company, and society,” he said.
Although it doesn’t have production set-up in Europe, Volvo’s UD Trucks (T&FME understands that Isuzu Motors has yet to complete the acquisition of the venerable truck-maker) which produces trucks in Japan and Thailand also said it is working to prevent the spread of the COVID-19 virus and secure the health and safety of its employees and all stakeholders.
March saw Nissan stop production in several domestic assembly factories in Japan, because of a shortage of Chinese parts. News agency Reuters also reported that Honda says it new car deliveries are hindered by a shortage of Chinese components and Mazda is now sourcing car and SUV parts from Mexico despite a significant increase to its costs.While there is undoubtedly disruption in the market, Japan has yet to see an outbreak on the scale of China and Europe and so production continued with UD unveiling details of its own measuress, including expanding flexitime work schedules, strongly encouraging administrative staff at the headquarters to work from home and asking employees to refrain from face-to-face meetings and prioritising online meetings.
“UD Trucks has been a leader in implementing work style reforms such as working from home (telecommuting), flexitime, and promoting the digitisation of the workplace. As a result, the company has established a robust and reliable digital infrastructure to ensure smooth and secure communication across internal and external networks,” said the company in a statement.
“Taking advantage of the digital tools that enable workstyle reform, UD Trucks administrative staff can effectively work from home in order to maintain the expected level of customer service and business communication while reducing the risk of infection among employees. UD Trucks will continue to give the highest priority to measures that prevent the infection of the coronavirus to help ensure the health and safety of our employees and all stakeholders.”
The situation at UD Trucks was in contrast to South Korea where Hyundai Motors shut down a factory in after a worker tested positive for the coronavirus, with Reuters reporting that the closure would disrupt production of popular models of the Palisade, Tucson, Santa Fe and Genesis GV80.
Hyundai operates five car factories in Ulsan which is close to Daegu – the most affected area in the country and has an annual production capacity of 1.4 million vehicles (30 percent of its global production). Hyundai employs 34000 workers there making it the world’s biggest car complex.
“The company has also placed colleagues who came in close contact with the infected employee in self-quarantine and taken steps to have them tested for possible infection,” Hyundai Motors said.