- As the coronavirus outbreak intensified in Europe and North America, the auto industry took the unprecedented step of shutting down factories on both sides of the Atlantic.
- The decisions moved forward at a staggeringly rapid pace. In the span of less than a week, the entire Western auto industry effectively ground to a halt.
- Carmakers had endured the Great Depression, two world wars, and the financial crisis, but they’d never dealt with anything like this.
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In Europe, it was clear that the factories would have to go silent; the massive robots that weld vehicle frames standing down, the intricate moving assembly lines moving no more, the anxious workforces sent home as the coronavirus pandemic ripped through the continent, sickening tens of thousands in Italy, Germany, and France.
The outbreak has decisively shifted: in China, where over 80,000 people had been sickened, the car plants were coming back online as the disease retreated in severity.
The fight had moved to Europe. Italy locked down the entire country, and France followed. German Chancellor Angela Merkel prepared her nation for its worst suffering since World War II.
At the end of the week of March 9, Europe’s major automakers began idling their plants. By the following week, the massive VW Group, BMW, the Mercedes-Benz parent Daimler, Porsche, the PSA Group, Renault, Fiat Chrysler Automobiles, Ford, Ferrari, Lamborghini, Nissan, and Rolls-Royce had all begun to phase down manufacturing. The initial shutdown would last two weeks.
The next wave would hit North America – the US, Canada, and Mexico.
Detroit forms a coronavirus task force
The crisis mounted during the week of March 9 as plants in the US Midwest, California, and the South continued to operate, but then the tide shifted. There was a work stoppage at an FCA plant in Canada, a coronavirus case at another factory in Indiana. At a Ford plant in Michigan, the United Auto Workers local demanded a shutdown.
By Sunday, the situation had become so threatening that UAW president Rory Gamble – just a few months into the job after the resignation of Gary Jones amid a federal corruption probe, and fresh off a 5o-day strike against GM in 2019 – called the Big Three CEOs together to form a coronavirus task force.
General Motors CEO Mary Barra, Ford CEO Jim Hackett, and FCA CEO Mike Manley were rapidly assessing their options and trying to come up with financial survival plans as the US airline industry and Boeing begged the federal government for bailouts.
The UAW’s purpose was singular: close the plants.
By Tuesday, March 17, the task force had met for hours, into the evening, and on Wednesday announced a plan of partial shutdowns with reductions in shifts to protect the workforce and clean factories.
It wasn’t enough.
Pressure grows to close factories
Additional coronavirus cases at GM and Ford facilities tested the automakers’ protocols. The UAW remained steadfast, and according to a source at the union, was facing panic at some plants, with slowdowns and assembly-line halts.
By Wednesday afternoon, the Big Three committed to a full shutdown in North America – an unprecedented decision. In more than a century of operation, the US auto industry had never ground completely to halt. In a matter of days.
Even during World War II, the plants switched from making cars to building tanks and planes. The 2008-09 financial crisis crippled GM and Chrysler, and nearly wrecked Ford, too. But the factories kept running.
And it wasn’t just Detroit that was going dark. In Northern California, a multicounty shelter-in-place directive meant that Tesla had to reduce to basic operations at its sprawling plant in Fremont, 40 miles southeast of San Francisco. Through “Detroit South” and in Midwestern factories operated by Japanese automakers, manufacturing was also idled.
Honda shut down everything in North America for a week. Hyundai ceased production in Alabama. Toyota announced short suspensions. The industry waited on Mercedes-Benz and BMW to follow.
In 2019, the US auto industry served a market in which 17 million cars and trucks were sold. It was expected to produce at similar levels in 2020. But by the week of March 16, Wall Street was talking about a worst-case scenario of five million, and a best case of 14-15 million.
On Monday, many factories were running flat-out on three shifts, cranking out SUVs and pickup trucks. By Thursday, they were going to zero. Mary Barra, Jim Hackett, and Elon Musk were offering to make ventilators at their companies’ factories, to prevent a shortage at potentially stressed hospitals on the front lines of the outbreak.
CEOs in crisis
Barra was on her third major crisis as CEO, following a massive recall in 2014 and the strike, the longest against an automaker since the 1970s, in 2019. Hackett was in the middle of an $US11 billion turnaround, with a stock price that was falling like a rock. Manley had taken over FCA after the sudden death of CEO Sergio Marchionne in 2018.
Nobody was ready for a global pandemic. But the UAW had stuck to its position, advocating for its 150,000 members working in the US.
“By taking a shutdown and working through next steps, we protect UAW members, their families and the community,” Gamble said. “We have time to review best practices when the plants reopen, and we prevent the possible spread of this pandemic.”
The unthinkable had happened – in record time.
It wasn’t a disaster. Yet. The industry was continuing to produce vehicles in the face of a demand collapse, as consumers hunkered down in their homes and dealership traffic disappeared. Inventory levels represented anywhere from a month’s supply to three. The Big Three all had war chests, built up from five years of booming sales and rich profits. The federal government was pumping in hundreds of billions of dollars to bolster the system. The industry could ride it out.
But still, nothing even remotely similar to this had ever taken place before. The industry had entered unmapped territory, and the biggest test in its history.
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