Automakers Hit Hard by New Coronavirus... Concerns Over Parts Supply Disruptions

Ford Q4 Earnings Show $1.7 Billion Loss... Outlook for This Year Also Worsens
Losses Expected to Increase as Resumption of Parts Factory in China Delays

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Due to the impact of the novel coronavirus infection (Wuhan pneumonia), major global automobile manufacturers are experiencing disruptions in parts supply, leading to expected poor performance in the first half of this year. Since the start of the Lunar New Year holiday on the 24th of last month, production at Chinese automobile parts factories has been halted, leaving some complete vehicle factories with only about a week's worth of parts remaining.

According to foreign media such as CNBC, on the 4th (local time), the U.S. automaker Ford announced a loss of $1.7 billion in the fourth quarter of last year. The earnings forecast for this year was also announced at 94 cents to $1.20 per share, falling short of the expected $1.26. Following a sluggish performance last year, including a more than 26% drop in vehicle sales in China due to the U.S.-China trade dispute, the novel coronavirus outbreak has caused disruptions in parts supply, darkening this year's earnings outlook.

According to the Nihon Keizai Shimbun, the global automotive industry's parts inventory averages about one month's supply, with some automobile factories reportedly having only about a week's worth of parts left. Chinese automobile parts factories, which had closed from the 24th of last month due to the Lunar New Year holiday, have extended their closures until the 9th due to the spread of the novel coronavirus, intensifying the parts shortage problem. As of 2017, there are over 100,000 automobile parts factories in China, accounting for more than 38% of the global automobile parts market.

If the spread of the novel coronavirus continues beyond the 9th, factory closures are expected to be prolonged. Nissan stated that joint ventures in China, invested in together with Toyota, Honda, and Ford, are expected to resume operations only after the 14th of this month. Experts predict that if parts supply disruptions last longer than expected, it could lead to poor performance in the automobile industry. Market research firm Bernstein Research forecasts that major automakers such as Volkswagen and BMW will see their sales to China decrease by at least 5% during the first half of this year. Nomura Securities warned that if measures such as restrictions on entry and exit to China continue, the risk of disruption in the automobile parts supply chain will increase.

Meanwhile, the spread of the novel coronavirus within China shows little sign of abating. According to the Chinese National Health Commission's announcement as of midnight on the 5th, the number of confirmed novel coronavirus cases is 24,324, with 490 deaths. Compared to the previous day, confirmed cases increased by 3,887 and deaths by 65.

This content was produced with the assistance of AI translation services.