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May 11, 2020 11:20 AM

Auto industry inches its way back to production

Alexa St. John
Automotive News
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    General Motors Photo by Jeffrey Sauger

    After weeks of false hopes and false starts, the global auto supply chain inched back into production readiness.

    Promising plant restarts in China followed by Michigan's decision to let manufacturing resume in the state both gave suppliers encouragement to make more concrete plans toward making auto parts again.

    But it's still unclear whether their auto maker customers truly are ready and able to open the floodgates to restart an industry locked down by the COVID-19 pandemic.

    Some early plans went nowhere. Toyota had been shooting for a resumption of North American production May 4 but then targeted May 11, "based on an extensive review with our supplier and logistics network," the company said.

    Similarly, Fiat Chrysler Automobiles had planned to resume operations at several U.S. factories May 4, but that date met with UAW opposition, making it impossible.

    A Renault plant in Sandouville, France, where partial activity had resumed at the end of April, was ordered by a French court last week to stop work for failing to ensure employee safety from the coronavirus.

    Nissan had been moving toward reopening its U.S. plants in mid-May. But last week, it changed its plan and remained closed without a restart date.

    Hurdle cleared

    At least one major roadblock in the industry's comeback was cleared last week: Michigan Gov. Gretchen Whitmer lifted restrictions on manufacturing in the auto-heavy state, effectively allowing multitudes of parts makers to restart their factories May 11.

    The Detroit 3, which had been considering various target dates, said they will resume building autos May 18.

    The state's decision quickly was lauded by the industry, since Michigan's supply base holds the key to automotive pipelines around the country.

    "We needed to have this kind of plan in place that allowed specific parts of the supply chain to begin working prior to when the automotive companies began their manufacturing so the supply chain would be full," said Julie Fream, CEO of the Original Equipment Suppliers Association, a supplier trade group.

    Fream's organization, which had pleaded with Whitmer at the end of April to allow parts factories to start running at least five days before auto makers restart their own production, is now appealing to law makers in other states that are restricting manufacturing over pandemic concerns.

    "It's difficult to build vehicles when you're missing one key critical component," Fream said.

    Meanwhile, the production restart in China and a surge in vehicle sales there is helping many manufacturers prepare for their restart in the U.S. and around the globe.

    General Motors CEO Mary Barra said in a recent call with investors that she saw early successes in China as a sign that production can safely resume throughout the globe.

    GM plans to implement employee protection protocols in all of its U.S. plants as they reopen.

    "Where our coronavirus safety protocols have been in place, we have not seen a confirmed case of community spread in our facilities," Barra said.

    Despite the eager attitude, auto makers likely will encounter pain points with smaller suppliers farther down the supply chain, warned Dave Andrea, automotive principal at Plante Moran.

    "It's not just your assembly plant and supply chain ramping up," Andrea told Automotive News. "We will find the pinch points where supply chains intersect two or three levels down in the chain."

    Competitive advantage?

    Andrea suggested that North America might end up in a better competitive position by being the last major developed auto region to succumb to the virus. Because the region shut down after China and Europe, it is in a better parts inventory situation, he argued. "The pump is partially primed and ready to start," he said. "Regions hit early may have gone down with a dry pipeline."

    Hyundai and Kia's U.S. plants started last week at reduced capacity, and Volvo Cars USA said it aims to restart its assembly plant May 11.

    BMW's plant in Spartanburg, S.C., has resumed.

    "We have restarted production with a careful, measured approach," a BMW spokesman said. "We have no intention of shutting down production again."

    Hannah Lutz contributed to this report.

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