Coronavirus Ripple Effects Hit Production at Airbus, Hyundai--Update
February 05 2020 - 8:17AM
Dow Jones News
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.
Tesla Inc., meanwhile, warned of delivery delays in China. Tao
Lin, a Tesla vice president, posted on chat service Weibo on
Tuesday that affected cars had been expected to be delivered in
early February. Tesla's factory in Shanghai has been closed due to
the outbreak.
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 08:02 ET (13:02 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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