Coronavirus piles pressure on Europe's stricken auto industry

BARCELONA/MILAN -- Europe's major car and parts makers rushed on Wednesday to close factories and cut output in Italy and considered sending workers home elsewhere, in the first signs that coronavirus is disrupting the region's struggling automotive industry.

Fiat Chrysler said it was temporarily halting operations at some of its Italian factories and would reduce production in response to Europe's largest coronavirus outbreak.

Italy all but put a halt to normal life, paring the economy down to just essential services in a desperate bid to stem the advance of the coronavirus.

Prime Minister Giuseppe Conte ordered all shops in the country to close except for grocery stores, pharmacies and a few others until March 25. Public transportation as well as financial and postal services will continue, but the country’s normally vibrant restaurants, cafes and bars will be shut.

Factories can continue operating, but only with “precautions,” the premier said in a televised address on Wednesday evening, adding that the government recommends non-critical facilities be shut.

Automakers face disruptions to supplies of parts being delivered from China as well as a fall in demand in regions hit by extensive quarantine measures which disrupt public life.

Forecasters at LMC Automotive on Wednesday revised their estimate for light vehicle sales downward by 4 percent this year, or 3.7 million cars, to 86.4 million units, the lowest level since 2013.

The revisions come as the World Health Organization described the Corona COVID-19 virus as a pandemic.

A moderate pandemic could worsen the outlook by another 2 million to 3 million units, LMC said adding that supply chain disruptions have caused higher logistics costs and that matters will get worse before they get better.

“The impact of COVID-19 on the auto industry has gone well beyond the initial focal point of China, resulting in downward forecast revisions across most major markets,” said Jonathon Poskitt, Director Global Sales Forecasts at LMC.

Italian tire maker Pirelli had said on Tuesday it was cutting production at its plant in Settimo Torinese, northern Italy, after a worker tested positive for the virus.

Italy is the worst-affected country in the world after China and the unprecedented lockdown of the country has heaped fresh pressure on the region's ailing car sector.

Other companies including Britain's biggest automaker, Jaguar Land Rover, and PSA Group  were also scrambling to deal with infections among staff, highlighting the risks to business beyond supply chains and Italy's borders.

The French automaker was beefing up safety rules on Wednesday at its Mulhouse plant with a 5,000-person workforce in eastern France after one employee tested positive, a spokeswoman said. The man has been on sick leave since Feb. 29.

Volkswagen, meanwhile, canceled a shift at a plant near Barcelona in Spain, operated by its Spanish unit Seat, because the coronavirus outbreak has hit its supply chain.

The German automaker may also send staff home temporarily from that facility and another one in the Navarra region of Spain if supply issues worsen.

Volkswagen's Czech unit Skoda also said there was the risk of a shortage of parts from China that might affect several of its plants.

The disruptions are the latest blow to Europe's automakers, which are struggling with weak global demand and high costs of meeting the region's tough emissions targets.

The virus has already taken its toll on business in China, the world's top car market, where vehicle sales tumbled last month as customers stayed home due to the epidemic.

An industry association warned last week that car sales in Italy, Europe's third-largest economy, could shrink by more than 15 percent.

Bloomberg contributed to this report