Fiat Chrysler, Volkswagen Halt Production in Parts of Europe

By Matthew Dalton, Eric Sylvers and William Boston 

Fiat Chrysler Automobiles NV is stopping almost all production in Europe for the next two weeks and Volkswagen AG has shut factories in Italy and Spain, as global manufacturers try to protect workers from the spread of the new coronavirus outbreak and as supply lines start to break down.

Meanwhile, some of Italy's biggest companies -- suddenly on the front lines of the outbreak -- are rethinking their assembly lines and other manufacturing processes to stay open. Similar re-evaluations are just now getting under way in the U.S., as the outbreak spreads rapidly there now, too.

EssilorLuxottica SA, the French-Italian designer-eyewear manufacturer of brands such as Ray-Ban and Oakley, said over the weekend it is shutting its factories in northern Italy for several days to implement new worker-protection measures negotiated with labor unions. The company will be largely adopting Italian government guidelines aimed at minimizing staff and spacing workers at greater distances from one another in manufacturing sites and along assembly lines.

Factory employees will also have to wear masks and get their temperatures taken when entering the factory, among other measures, the company said.

In the U.S., executives and industry analysts are also now starting to think about how to adjust production schedules and experiment with changes. In Chattanooga, Tenn., Volkswagen AG is closing down its factory on Monday to allow workers to make arrangements amid closed schools.

"We will also take time to augment the already increased sanitary and deep-cleaning measures undertaken at our facility," a spokesman said. Production will resume Tuesday.

Fiat Chrysler last week said it would also space out employees at workstations at its Italian plants, a move that it said would lower daily production rates. Monday morning, it took the more drastic step of closing down almost all manufacturing in Europe for two weeks.

The car maker said it would close six Italian factories that assemble Fiat, Jeep, Maserati and Alfa Romeo branded vehicles. The company is also shutting down a factory in Poland and one in Serbia that make Fiats. The company, which has about 65,000 employees in Europe, didn't say how many workers would be staying home due to the closures.

Like all companies in Italy, and in many other parts of Europe, Fiat Chrysler has most of its office-based employees already working from home. The factory workers forced to miss work due to the closings will get most of their salary through a largely government-funded scheme for companies in difficulty.

Fiat Chrysler last month temporarily halted production in its Serbian factory because it couldn't get parts from China. The factory closings announced Monday aren't linked to an inability to get parts, according to a person familiar with the situation. It is keeping open some smaller factories in Italy that make motors and other parts because in those plants it is easier to make adjustments to respect the minimum-distance requirement.

The factories being closed include one in the south making the Jeep Renegade that are exported to North America. Fiat Chrysler imported a total of 98,429 vehicles from Italy to the U.S. in 2019, according to the International Trade Administration.

Ferrari NV and Lamborghini, the luxury-car maker owned by Volkswagen, both closed their own factories in Italy over the weekend. Ferrari said it was experiencing supply line issues, while Lamborghini's chief executive said in a statement that shuttering his plant was "an act of social responsibility."

Volkswagen, the world's biggest auto maker by sales, said Monday that it is becoming difficult to maintain production in its European factories because of disruptions to suppliers and national governments declaring emergencies. It said, however, that as the situation darkens in Europe, its production base is improving in China, where 31 of its 33 factories are now back online after weeks of being closed as the coronavirus pandemic gripped that country.

"While the situation in China is stabilizing, it is becoming more difficult in Europe," said Jörn Roggenbuck, a Volkswagen spokesman. "It is becoming more complicated to maintain supply chains."

Volkswagen's Lamborghini and Bugatti plants in Italy have halted production. In the wake of the Spanish government's declaration of a state of emergency Volkswagen factories in Martorell and Navarra have shut down. The plants produce vehicles for SEAT and other Volkswagen passenger car brands.

As the coronavirus spread takes hold in the U.S., executives and analysts are considering changes, there, too. Retooling assembly lines drastically, though, is especially tough for the U.S. auto industry, where there is very little redundant capacity, said Brian Collie, director of automotive practice at Boston Consulting Group.

"Most vehicle manufacturers tend to manufacture a given model line on one line. Most suppliers for a given vehicle program tend to manufacture that out of one facility," he said, adding: "So the question is what happens at that plant if somebody then gets the coronavirus? How do you then work through that?"

He says some manufacturers are limiting the number of visitors to sites, including suppliers. Paul Sura, vice president of business operations at Cypress Semiconductor Corp., which supplies electronic components to the industry, said the company is restricting factory visits.

"We're basically turning away any visitors. If customers want to come and audit us, which is a normal thing on a weekly basis, none of that is happening," he said. "It's all postponed at least two to three months. We're just not letting anybody in unless you have to be there to keep that factory going."

Write to Matthew Dalton at [e-mail], Eric Sylvers at [e-mail] and William Boston at [e-mail]

(END) Dow Jones Newswires

March 16, 2020 05:58 ET (09:58 GMT)

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