Rubber industry companies navigating coronavirus pandemic

The world has changed.

And rubber companies are trying to navigate the chaos caused by the coronavirus while seeking to maintain operations and keep their employees safe.

While many are sheltering at home and isolating themselves, manufacturing companies face the challenge of needing staff on hand to create products.

At the Fairlawn, Ohio, offices of ContiTech, the non-tire rubber product business of Continental A.G., about 200 workers at corporate headquarters have been instructed to work from home. Plants located around the U.S. were continuing to operate when the company was reached for comment.

"They told everybody to go home. Everybody is working from home. There's a travel ban. They can't travel, can't come to work," a spokesman for ContiTech said.

A person is providing security at the facility, but no visitors are allowed at the company's headquarters.

"Internally, there is a group of people who are monitoring the situation because it is a very fluid situation. Things can change minute-to-minute, hour-to-hour. They are prepared to react to things that could possibly occur," the ContiTech spokesman said.

The company continued to operate plants around the country, but "obviously that could change."

"They are prepared to react to things that could possibly occur," he said. "They are telling everybody to heed all of the precautions that are given by the experts, especially the medical experts and people who monitor disease control, and follow any of those guidelines," the ContiTech spokesman said.

At Cooper Standard Automotive Inc., a Novi, Mich.-based automobile supplier, a spokeswoman said in an email "things continue to move rapidly, but this is where we are at this point in time."

"Cooper Standard is closely monitoring the rapidly developing coronavirus outbreak. The health and safety of our employees remains our top priority," she said. Over the past two months, Cooper Standard has proactively implemented a number of actions to help keep our employees and stakeholders safe."

The company has created a visitor screening questionnaire and is limiting what it calls "non-critical visitors," the spokeswoman said. Cooper Standard also is requiring social distancing guidelines, which require that people do not have close contact with one another. There's also increased cleaning of common surfaces and a restriction of all domestic, international and local business-related travel.

The company is requiring employees to work from home when possible.

Cooper Standard previously temporarily idled plants in China and indicated operations elsewhere could be shut down. "Our manufacturing operations in countries outside of China may also be temporarily impacted as our customers consider actions in their facilities," the spokeswoman said.

Federal officials, meanwhile, have published new guidance to help companies deal with the potential for coronavirus in the workplace.

Companies also already are beginning to see the pandemic having a downward impact on business. Germany's Wacker A.G., one of the world's largest makers of silicone, expects the coronavirus to have a negative impact of more than $110 million on its annual earnings in 2020.

"From today's perspective, 2020 is going to be another very challenging year," said CEO Rudolf Staudigl on March 17, in presenting the German group's annual report.

The uncertainties arising from the coronavirus, he added, "currently top all other risks."

For the full year, Wacker revised down its earlier forecast of a "mid-single-digit percentage" decline in EBITDA (earnings) in 2020.

"Due to the drastic developments since the end of February, Wacker rates the risk of a coronavirus pandemic as likely. … EBITDA, in consequence, could decline by a two-digit percentage versus last year," the German chemicals group said.

Wacker sales for first two months of the year were lower compared to last year, partly due to restrictions in China on shipping products to customers. The firm said the restrictions are dampening every division's sales in China.

Wacker also confirmed a loss of about $700 million, as reported in its preliminary figures for 2019.

Practical advice

"Guidance on Preparing Workplaces for COVID-19" from the Occupational Health and Safety Administration in the U.S. Department of Labor is designed to help both companies and employees respond in case of a virus discovery on the job.

The document includes classification of workers according to their exposure risk. High-exposure risk employees include health care workers, medical transport staff and even mortuary staff.

"Medium exposure risk jobs include those that require frequent and/or close contact with (i.e., within 6 feet of) people who may be infected," OSHA writes. "In areas without ongoing community transmission, workers in this risk group may have frequent contact with travelers who may return from international locations with widespread COVID-19 transmission," the document states. "In areas where there is ongoing community transmission, workers in this category may have contact with the general public."

Lower exposure risk jobs "are those that do not require contact with people known to be, or suspected of being infected," OSHA said, or those who have frequent close contact with the general public.

For those in the medium exposure risk category, the federal government suggests engineering controls such as use of physical barriers, including clear plastic sneeze guards where practical. Companies also should consider offering face masks to ill employees and customers.

In case of a shortage of masks, companies can utilize and sterilize the more-durable face shields.

The new booklet is in addition to a COVID-19 web page that was recently launched by OSHA.

"This guidance outlines practical ways that employers and workers can address potential health risks from the coronavirus in their workplaces," Loren Sweatt, principal deputy assistant secretary at OSHA, said in a statement.

Areas at high risk

A just-published report from a well-known credit rating firm indicates automotive suppliers and manufacturers are among the industries that will be hardest hit by the coronavirus outbreak.

But health care-related operations are expected to benefit as the need for products and services spike.

The study from Moody's Investors Service lists both suppliers and auto makers along with apparel companies, consumer durable firms and the gaming industry as having "high exposure" to impacts from the virus.

Other key markets with high exposure include lodging and tourism, airlines, non-food retailers and global shipping, Moody's said.

Chemicals, manufacturing, oil and gas, and service companies all fall under "moderate exposure," while construction and materials, defense, equipment, and transportation and packaging have "low exposure" at this point, Moody's said.

"Global auto makers are also under great pressure because of their reliance on international supply chains," Moody's said.

"Companies' ability to withstand the effects of the virus will depend on its duration, and we caution that as events unfold very rapidly on a daily basis, our assessment of exposure will change over time," said Richard Morawetz, a Moody's vice president and co-author of a report on the issue.

The credit rating agency said the report is based on "normalization of economic activity" during the second half of 2020. "Moody's downside scenario factors in a jump in cases and public fear that the virus will not be contained in the first half of 2020, leading to extensive and prolonged travel restrictions and quarantines, along with a prolonged slump in commodity prices."

Gross domestic product growth in advanced economies around the world will fall to an expected 1 percent this year, down from 1.7 percent last year, Moody's predicts.

"The ability of some companies to withstand the effects of the virus will depend on its duration. We caution that as events unfold very rapidly on a daily basis, there is a higher than usual degree of uncertainty around our forecasts, and our assessment will evolve over time with new developments," the credit rating firm said.

A slowdown in automotive sales will impact the supply chain, including OEM parts containing rubber as well as tires needed for new vehicles. The new vehicle business is softening amid the crisis and dozens of assembly plants in Europe and North America (GM, Goodyear and Ford, among others) already have closed due to a downturn in sales. Decisions to close automotive assembly lines will quickly flow back upstream in the supply chain.

Sectors including health care services and waste management will benefit from the demand for essential services, Moody's said.

Taking precautions

Chemical giant Ineos Group is enacting a series of "social distancing" measures designed to help workers against the coronavirus.

"Our immediate priorities are to keep our people safe and keep our plants and businesses running," CEO Jim Ratcliffe said in a statement.

New rules call for all office workers to work from home, and people who have to be in offices or plants observe a "1-meter rule" with zero contact between employees.

The London-based company also is requiring "rigorous use of hand gel and surface cleaning" and prohibiting plant and office visits in response to the COVID-19 virus.

Non-essential work at plants has been postponed, and group events are canceled.

"Our responsibility and our focus is to ensure the plants that we run, which produce products essential to everyday life, including the health care system, remain operational, with the safety of our employees the No. 1 priority," Ratcliffe said.

Ineos has petrochemical, specialty chemical and oil product manufacturing sites through the world. The company has 183 locations in 26 countries and 22,000 employees.

Production operations of Trelleborg A.B. are still ongoing in Europe amid the "fast-evolving" situation caused by the spread of coronavirus in that region, the company said.

"All our facilities are up and running in Europe, at this point in time," a company spokeswoman said in a March 16 statement.

However, she added, it is "almost impossible to say something that is valid for a longer time."

While keeping track of country-specific regulations with regards to COVID-19, the Swedish rubber group said it was running its business as usual until further notice. "We are monitoring the situation very carefully with regards to our employees' well-being and commitments to customers," the spokeswoman added.

European Rubber Journal contributed to this report