VW, Airbus Shut Plants as Pandemic Slams European Industry

(Bloomberg) --

Europe’s biggest industrial manufacturers from Volkswagen AG and Airbus SE to Daimler AG are taking unprecedented steps to idle plants across the region as the rapidly spreading coronavirus outbreak inflicts increasingly greater economic pain.

VW, the world’s largest automaker, joined a host of rivals and suppliers on Tuesday in suspending output across its European factories as a synchronized halt not seen in decades gained momentum. Airbus, the biggest planemaker, will shutter production at sites in France and Spain for four days to clean floor stations and separate workers, while Daimler is halting most of its output in Europe for at least two weeks.

The plant shutdowns demonstrate the staggering effects the coronavirus is having worldwide, only a few weeks after it appeared to be mostly confined to China and neighboring countries in Asia. With Europe now the epicenter, and the outbreak spreading in the U.S., restrictions and self-quarantine have made it hard for manufacturers to keep factories open and move parts around. At the same time, demand has slowed to a trickle from airlines that feed the global duopoly of Airbus and Chicago-based Boeing Co. and in the automotive industry.

“This would mirror what happened in China at the start of the outbreak, where new vehicle sales fell by about 80% year on year in February 2020,” Fitch Ratings said in a report. “We expect car sales to plummet in the largest European automotive markets including Italy, Spain, France and Germany in March.”

‘Very Difficult’

VW’s shutdown will last about two weeks in Germany, where it operates the industry’s biggest plant at its Wolfsburg base. The carmaker is Europe’s largest industrial company, employing about 475,000 people in the region. Sites in Italy that build Lamborghini sportscars and Ducati motorcycles, along with Seat economy models in Spain and VW-branded SUVs in Portugal will be idled by week’s end.

“The corona pandemic presents us with unknown operational and financial challenges,” VW Chief Executive Officer Herbert Diess said in an annual earnings webcast. This year will be “very difficult,” and there are concerns about the sustained financial impact of the health crisis, he said.

Airbus also moved on Tuesday to close plants temporarily following a further tightening of containment measures by France to limit the movement of people outside their homes. Like Boeing, the European planemaker is speaking with governments about aid to the aviation industry.

Airbus is based in Toulouse, France, where it employs about 26,000 and churns out wide-body aircraft and the A320neo family of single-aisle planes. Bloomberg News reported earlier this month on a risk it will cut its annual target for deliveries as virus-shocked customers seek to delay getting their orders.

Read more: Airlines Need Up to $200 Billion to Survive Virus, IATA Says (2)

Carmakers from PSA Group and Fiat Chrysler Automobiles NV to Renault SA are also suspending production as they contend with similar health, supply and demand challenges. Mercedes-Benz maker Daimler said the halts would affect car, van and truck plants.

Truckmaker Volvo Group said it had shuttered plants in France and Belgium, and expects its Gothenburg, Sweden factory to close on Monday. Nissan is stopping output Tuesday at its giant Sunderland plant in the U.K.

Sick Workers

Ford Motor Co. is halting production starting Thursday for a “number of weeks” at its main manufacturing sites in Cologne and Saarlouis in Germany and Craiova in Romania, according to a statement. An assembly plant in Valencia, Spain was shuttered Monday after three workers were confirmed to have the virus.

“Component supplies to Ford manufacturing sites in Europe have been increasingly interrupted, while sales of vehicles across the industry have declined with dealerships required to temporarily close their sales operations in some countries,” the company said.

Fiat Chrysler said Monday it will suspend output in most of Europe while PSA, the maker of Peugeot, Citroen, Vauxhall and Opel, is closing all European production sites this week, as the French government closes non-essential shops including car dealerships.

The PSA moves affect plants in France, Spain, Germany, the U.K., Poland, Portugal and Slovakia. Rival Renault also shuttered French plants until further notice, a move it said would affect a dozen sites and 18,000 workers.

Among suppliers, Magna International Inc. is shutting down its car assembly plant in southern Austria, where 6,000 workers make Mercedes-Benz, BMW and Jaguar Land Rover vehicles, for two weeks because it can’t get needed parts. Tire-maker Michelin idled nearly all factories in Spain, France and Italy, a move that will affect 21 sites and about 20,000 workers.

VW said it’s unclear how severely or for how long it will be affected, illustrating the problems the pandemic has posed for corporate financial outlooks.

“It is almost impossible to make a reliable forecast,” VW Chief Financial Officer Frank Witter said.

RBC, which cut its global auto production outlook on Monday, now anticipates a 16% decline for 2020, leading to substantially reduced estimates for VW as well. Analyst Tom Narayan said in a report that he expects the German carmaker’s current forecast to be withdrawn.

©2020 Bloomberg L.P.