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Pressure to restart auto industry grows, but it faces major hurdles

As COVID-19 cases show signs of flattening even as deaths continue to rise, pressure is intensifying to restart the economy in Michigan and across the country.

Michigan CEOs, medical professionals and labor leaders are consulting Gov. Gretchen Whitmer, she said Wednesday. And President Donald Trump hosted a call with top executives of the nation's four automakers and other industrial firms to push preparations to reopen the economy as early as next month.

The moves come as stay-at-home orders have grown to cover most Americans and as revenue-starved businesses cut back, forcing millions to lose their jobs. In few places is the pain more acute than Michigan, an industrial and politically vital state that is among the nation’s leaders in jobs lost so far.



"This is an unprecedented event in modern automotive times, even if you look back to World War II," said Stephanie Brinley, principal analyst at IHS Markit Ltd. "The plants still operated and things still came out of it. Your workforce wasn't sidelined."

The urgency to return to work is rising as the threat from COVID-19 eases. Protesters crowded Lansing streets in vehicles and stood outside the state Capitol on Wednesday to protest Whitmer's latest order aiming to protect public health being too restrictive. Meanwhile, Whitmer says she is in talks with the governors of neighboring Indiana, Illinois and Ohio over when and how to restart their economies in the major auto-producing states.

"The automotive industry is important to the U.S. economy, but it is also quite different than many other businesses," said Doug Betts, president of J.D. Power's automotive division, during a webinar this week. "The combination of high capital investment, heavy involvement of regulations, and the franchise model for going to the retail market makes it very different and somewhat non-intuitive versus other businesses.”

The industry also has a global supply base. Companies must navigate a patchwork quilt of rules determined by each country and state for which industries are "essential" during the outbreak. Some say auto manufacturing is essential, while others do not.

The bottom line, experts say, is that restarting vast chunks of the U.S. economy is neither easy nor uncomplicated. Sprawling supply chains, partisan political concerns and varying arcs of COVID-19 infections can influence the real-world balancing of prudent public-health policy with deepening economic concerns.

“There are larger partners that are at play, including federal guidelines, state guidelines, and as we’ve gotten into this, there's county-wide rules that are baking into our process all the time,” said Jim Glynn, General Motors Co.’s vice president and global head of workplace safety. “The question about restarting for us, for me and our time is when we do get the green light to start up we want to make sure we are prepared — whenever that date comes.”

Interdependency

Ideally, Ford Motor Co. CEO Jim Hackett previously has said, there would be a nationally coordinated approach to restarting the economy around a certain date. With that established, Ford would declare a new date for when it will build vehicles again.

GM and Ford have suspended production indefinitely after beginning to shut down North American operations on March 19. Fiat Chrysler Automobiles NV has said it hopes to ramp up progressively starting May 4 after Whitmer’s stay-at-home order expires May 1. Some state orders, however, extend into June.

If a supplier in one state doesn’t think it can operate under another state's rules, it could prevent production from restarting in another — a tiny glimpse into the just-in-time, integrated supply chains of the global auto industry and other manufacturers.

“In a typical, well-run assembly plant, there may be only 20 minutes of on-hand inventory for any significant Tier 1 part,” Betts said. “Twenty minutes after a Tier 1 ships, the factory would be shut down for lack of parts.”

Production shutdowns are costly. FCA’s 47-day shutdown is longer than the United Auto Workers' 40-day national strike against GM last fall during which the company estimates it lost $3.6 billion. And it is not just Detroit that's sitting idle.

Honda Motor Co. Ltd.’s 12 plants, Toyota Motor Corp.’s 10 plants and Hyundai Motor Co.’s one U.S. plant are closed through May 1. Nissan Motor Co. Ltd.’s three plants will remain shut down through late April. Subaru Corp. will resume production May 11 in Indiana. Volkswagen AG does not expect the shutdown of its Tennessee plant to last more than four weeks — a deadline of Saturday.

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Source - https://www.detroitnews.com/story/news/local/michigan/2020/03/28/michigan-reports-nearly-1-000-new-covid-19-cases-largest-daily-jump-yet/2933100001/

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