More than 1.1 million autoworkers have been forced to stay home in Europe as the coronavirus pandemic closes plants and brings production in the region to a standstill.
The European Automobile Manufacturers’ Association said that factory closures have so far affected roughly 40% of workers directly employed in vehicle manufacturing in Europe. The work stoppage has already reduced regional production by 1.2 million units, it added.
“Right now, the primary concern … is to manage the immediate crisis facing the auto industry, which has essentially come to an abrupt halt — something the sector has never experienced before,” said Eric-Mark Huitema, director general of the association.
Carmakers including Volkswagen (VLKAF), BMW (BMWYY), Daimler (DDAIF), Honda (HMC), Fiat Chrysler (FCAU) and Peugeot owner PSA Group (PUGOY) have closed factories as Italy, France, Germany and the United Kingdom impose restrictions on work and public life in order to prevent the virus from spreading.
The automotive sector, which has already endured more than two years of a sales recession, now faces its biggest crisis since the 2008 global financial crisis, according to GlobalData, an analytics company.
“Supply chains are affected and workforces are affected. It is challenging to manufacture vehicles and components without endangering a workforce,” said Calum MacRae, an analyst at GlobalData.
The European industry association said that nearly 14 million jobs in Europe depend on automaking. And 83% of European automotive suppliers are concerned about supply chain disruption because of the pandemic, according to research firm IHS Markit.
Continental (CTTAF), a major supplier based in Germany, withdrew its 2020 financial outlook on Wednesday after ongoing uncertainty forced it to temporarily close 40% of its 249 production locations worldwide. In Germany alone, 30,000 of the company’s employees have registered for short-time work, a program that enables companies to send their workers home or reduce their hours without laying them off.
“In periods of crisis, financial liquidity is of top priority,” CEO Elmar Degenhart said in a statement. “To this end, we are cutting our costs, optimizing our working capital and postponing projects and investments that are not urgently required until further notice.”
Companies take action
Volkswagen, the world’s largest car manufacturer, has shuttered factories in Europe including its plant in Wolfsburg, Germany, one of the biggest manufacturing sites in the world. Fiat Chrysler has also shut down its factories across Europe, but there have been no permanent layoffs made by the group yet, according to a spokesperson.
“As the pandemic has spread, we have prioritized creating a safe and healthy workplace but also worked to safeguard the jobs of permanent FCA employees,” CEO Mike Manley wrote in a letter to employees on March 30. FCA employees in Italy are taking temporary leave, with their pay subsidized by the government.
Mercedes owner Daimler (DDAIF) said in a statement that it would apply for short-time work for many production and selected administrative staff in Germany from April 6 through at least April 17.
Honda employs 3,000 people at its factory in Swindon, in the United Kingdom, where production has been suspended until April 14 in accordance with government guidance. Workers who are not required to attend work will continue to receive pay.
Other carmakers have taken similar steps in Europe.
