Last week, we detailed the plant closures and other precautionary measures being enforced throughout China to combat the spread of the human Coronavirus. China, which boasts the world’s second-largest economy that is also responsible for a quarter of global manufacturing output, has locked down a number of its large cities, with nearly half of the country’s 1,400,000,000 people under some form of restraint. The shuttering of manufacturing facilities initially began as a routine practice ahead of the Chinese Lunar New Year holiday, but after nearly three weeks, much of the country’s production base remains idle.
The BMW Brilliance factory in Shenyang, which employs a workforce of 20,000, reopened on Monday, February 17, while other production sites remain either closed, or are operating at a fraction of their designed capacity. With roadblocks, checkpoints, and large cities remaining under a government-mandated lockdown, many individuals in the Chinese workforce are unable to get to work. At the same time, the closure of major cities and transportation routes has also resulted in the severing of crucial, high-traffic supply lines.
While multinational entities like BMW and other members of the automotive industry are better equipped to weather the storm, many have already issued warnings of lowered guidance for the rest of the fiscal year. Small businesses in China are being especially hard hit, as what has become an extended three-week Holiday with no apparent end in sight may ultimately translate to many small restaurants and shops closing for good, as they can only exist without business for so long. The Chinese government has insisted factories producing medical supplies and protective equipment continue to run around the clock, as the world is already experiencing a shortage for masks, such as the 3M N95 respirator design.
Although the BMW Brilliance factory has reopened, supposedly near capacity, the remainder of the manufacturing base is struggling to reboot. Toyota, GM, and Volkswagen have all begun reopening plants, but with production output running at a fraction of capacity. For example, of its fifteen different facilities in mainland China, Volkswagen reopened just one last Thursday. Caterpillar, which plays a much more direct role in the still-developing Chinese economy, reportedly reopened its facilities last Monday at the request (or perhaps the insistence) of the Chinese government. Honda will reportedly restart production a week from now, on February 24. Apple, the maker of the iPhone and iPad, and the world’s most valuable company by market capitalization, has already warned of supply chain disruption due to the viral outbreak.
Over 760,000,000 people in China remain under lockdown, while the country boasts a workforce of approximately 700,000,000. According to the American Chamber of Commerce in Shanghai, the majority of member companies have restarted operations in some form or another, but most are running skeleton crews due to a lack of available manpower.
At the time of this writing, nearly 1,900 people have succumbed to the virus, referred to as COVID19, while more than 71,000 have contracted it. Hundreds of Americans who were evacuated from mainland China and the Diamond Princess cruise ship, currently docked in Yokohama Japan, are currently in the midst of serving a fourteen-day quarantine. The latest reports are showing a decrease in fatalities and the rate at which new cases are being reported.
In 2019, the BMW group delivered 2,520,307 BMW, MINI, and Rolls-Royce-brand vehicles. 720,000 of those went to China, the automaker’s largest single national market. Like other production facilities across China, workers are subject to mandated temperature checks and the wearing of protective equipment, like face masks. The BMW Brilliance factory is expected to resume full production capacity as soon as Tuesday, February 18.—Alex Tock
[Photos courtesy BMW AG.]