As President Donald Trump and his economic advisers look to start reopening the U.S. economy in May, a big question is emerging for companies with supply chains stretching across North America.
Manufacturers in sectors ranging from chemicals to electronics have suppliers across the continent’s national borders.
The U.S. auto industry is only about 3 to 3.5% of the U.S. economy, or GDP.
Some of the big carmakers have indicated plans to reopen starting in early May. But for the auto industry in particular to get back to producing vehicles, it’s not enough to just reopen parts companies, it’s the coordination with all the suppliers, too.
FCA plans to start reopening plants on May 4, Nissan to mid-May. Ford plans to open May 4 for their Kentucky truck plant. Volvo aims to reopen U,S, plants on May 4 as well.
Auto supply chains across North America are so intertwined that a smooth reopening means auto-producing states in the U.S., provinces in Canada and Mexican states have to get on the same page.
Mexico President Andres Manuel Lopez Obrador last week pledged to reopen the country’s vehicle and auto-parts plants three to five days ahead of the U.S. schedule to ensure supply chains can get back up and running.
With the North American Free Trade Deal coming on line soon this coordination is more critical than before.
Hit hard and hit early by the global coronavirus pandemic, Europe is now hoping to start getting its economy back in running order – with the auto industry leading the charge.
Hyundai was first to open on April 14 for two shifts, relaunching operations at a Czech plant on Tuesday. Volvo has reopened their European production plant in Sweden. A number of other leading automakers expect to resume production next week, at least at some of their plants, including Volkswagen, Mercedes-Benz, Volvo and Toyota, with Peugeot working out final details meant to preserve worker safety and restart operations. Plant in Turkey toped next week.
Renault reopens its plant in Portugal on April 21.
In most cases, automakers are expected to ramp things up slowly, starting with one or two plants operating at reduced line rates.
Volkswagen Group, the world’s largest automaker, which is already back in operation at 32 of its 33 plants in China, plans to start off in Europe with its plants in Germany, Slovak, Portugal, Russia and Spain as well as the U.S., which currently are scheduled to resume production during the week of April 27.
VW is not relaunching plants in Argentina, Brazil, Mexico and South Africa until May; late-April target for its factory in Chattanooga, Tennessee.
Each European nation will determine its own timetable for letting businesses resume operations and allowing residents to come out from lockdown.
The UK remains a central part of the European automotive manufacturing network, but it has now extended its own closures for at least another three weeks.
France and Poland are set to ease restrictions enough to let Toyota restart plants in both of those countries on April 22.
Daimler AG’s Mercedes-Benz brand is expecting to open three German plants next week, including ones in Berlin, Hamburg, and the Stuttgart. The Berlin plant is particularly important as it supplies engine control systems for Mercedes products sold in China. The luxury marque is hoping to soon restart at least two other German factories.
Peugeot is negotiating procedures to reopen as soon as possible.
Car sales in Europe and key export markets like the U.S. and China have been hammered by the pandemic. In many markets, there are gluts of unsold cars, manufacturers will want to be slow and cautious about overwhelming dealers with even more vehicles.
For consumers, there will be incentives and low finance rates to motivate consumers back to the dealer lots. They key to success is for manufacturers to have a well-thought out plan to avoid more losses.
Lauren Fix, The Car Coach® is a nationally recognized automotive expert, media guest, journalist, author, keynote speaker and television host. Post your comments on Twitter: @LaurenFix or on her Facebook Page.
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