AIR Airbus SE

By Benjamin Katz and Kwanwoo Jun 

Airbus SE shut down a key factory in China, cutting almost 10% of global production of its most popular jet, as precautions taken to contain the coronavirus outbreak ricochet across global industries.

The move follows Hyundai Motor Co.'s decision Tuesday to begin suspending production at all seven of its plants in South Korea because of a lack of parts made by suppliers in China. It was the first big auto manufacturer to close factories outside of China because of supply-line bottlenecks created by widespread factory outages inside the country and strict limits on worker movements.

Many global companies have suspended production, closed facilities and shut retail outlets in China. In many cases, they have extended preplanned shutdowns coinciding with the Chinese Lunar New Year. As it tries to contain the spread of the deadly coronavirus, the Chinese government has ordered most big plants to stay closed until Feb. 10. Airbus had already closed its factory for the holiday. It said Wednesday it was now extending that suspension indefinitely, depending on further guidance from Beijing.

The list of companies suffering from Chinese production stoppages includes major foreign auto makers as well as technology giants such as Apple Inc. and Foxconn Technologies Co., the biggest manufacturer of its devices. Analysts expect Apple to ship between 5% and 10% fewer iPhones in the current quarter because of the disruption.

Many other companies are bracing for supply-line shocks. Industrial giant Siemens AG set up a crisis team to ensure it can continue to operate through the epidemic. Chief Executive Joe Kaeser told reporters Wednesday the team was monitoring potential bottlenecks in the company's supply chain. China is one of Siemens's largest markets, worth roughly 10% of the group's total sales.

So far, the German company hasn't encountered problems purchasing components. The crisis team was to "make sure it stayed that way," Mr. Kaeser said.

Airbus, the world's largest jet maker by deliveries, said Wednesday that domestic and international travel restrictions were hampering its ability to continue production at its Tianjin factory. The plant manufactures Airbus's bestselling A320neo narrow body, the rival to Boeing Co.'s 737 MAX. The factory currently produces about six jets a month. Airbus makes just over 60 of the jets a month globally.

The closure is likely to cause some delivery delays for Asian carriers. If extended, it could affect cash flow at the plane maker, since customers typically pay for planes on delivery.

"Airbus is constantly evaluating the situation and monitoring any potential knock-on effects to production and deliveries and will try to mitigate via alternative plans where necessary," the company said.

Airbus also has a smaller facility that applies finishing touches on A330 wide-body jetliners that it delivers in China. It said last year it was expanding that facility to accommodate A350 jets. The facility, though, only delivers a handful of those bigger planes a year.

Ericsson AB, the Swedish telecom-equipment maker, said it has suspended production in China. A spokesman said the company has 11,000 employees in China and 450 in Wuhan, the epicenter of the coronavirus outbreak. Ericsson has 99,000 employees globally.

"We have a global supply chain, and [while] China is a big market, we have manufacturing in other countries as well," the spokesman said. The company had a flexible supply chain and its level of manufacturing in China varies year over year, he added.

--Ruth Bender and Parmy Olson contributed to this article.

Write to Benjamin Katz at ben.katz@wsj.com and Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

February 05, 2020 07:22 ET (12:22 GMT)

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