News ID: 265854
Published: 0829 GMT February 19, 2020

UK car factories running out of parts due to coronavirus, warns Jaguar

UK car factories running out of parts due to coronavirus, warns Jaguar
The Jaguar assembly plant in Castle Bromwich, the UK (BLOOMBERG VIA GETTY IMAGES)

Jaguar Land Rover has warned it could run out of car parts at its British factories at the end of next week, as the coronavirus halts supplies from China.

Britain’s biggest carmaker added its voice to a chorus of companies counting the cost of the outbreak, as the epidemic weighs heavily on international business and trade, the Guardian reported.

“We are safe for this week and we are safe for next week and in the third week we have … parts missing,” said the JLR chief executive, Ralf Speth. He added: “We have flown parts in suitcases from China to the UK.”

Speth added that the company was currently making no sales in China, one of its most important markets.

Apple cut its sales forecasts and could be set for further pain after its major iPhone supplier said quarantine protocols meant it was struggling to squeeze as many workers into its factory dormitories as usual.

Speth said JLR had enough parts from China to maintain its British production for the next two weeks but not beyond.

The firm has three UK plants — Halewood on Merseyside, and Castle Bromwich and Solihull in the Midlands — but did not say if they might have to close or reduce production.

 “If you think back to the Japanese earthquake and tsunami, there were critical parts coming from Japan, so Japanese producers shut down in the UK,” said Professor David Bailey, of Birmingham Business School. “It depends whether they have second sourcing agreements to get parts elsewhere and whether they can flex those.”

Apple has been among the hardest hit of the world’s major companies. The smartphone maker said that the coronavirus may have shaved billions of dollars off global sales.

Apple said it may not hit its sales forecast of between $63 billion (£48 billion) and $67 billion for the quarter ending this June, citing uncertainty caused by the epidemic.

Its key iPhone supplier, Foxconn, has switched some of its production to making surgical masks instead of smartphones, but is reportedly struggling to get its production lines back up to speed.

It usually fits eight workers into each dormitory at its factory in Zhengzhou but quarantine measures mean each now has to have their own room, the Financial Times reported.

Craig Erlam, senior market analyst at OANDA Europe said Apple’s forecast was “likely the first of many profit warnings as the coronavirus continues to wreak havoc in the world’s second largest economy”.

Analysts have suggested that Apple’s South Korean rival Samsung could benefit from the US firm’s supply chain issues. But the South Korean domestic economy is far from isolated from the outbreak’s effects.

A day after economic forecasters warned Japan was facing a recession due to regional disruption to trade, South Korea’s president, President Moon Jae-in, told members of his administration that the country needed to take “emergency” steps.

George Magnus, associate at Oxford University’s China Centre, said: “The knock-on effects from Chinese demand grinding to a halt are most acute for Hong Kong, but also for Australia, Japan, South Korea, Taiwan, Malaysia, Thailand, Singapore — and Brazil as a commodity producer.”

He said affected economies would recover from the impact quickly if restrictions imposed by Beijing were lifted within a few months.

“But if it turns out that China sustained the clampdown regime into the early summer or beyond, then the cumulative effects would increase significantly,” he said.

“A Chinese recession — unheard of — would send shockwaves through the world economy. Hopefully though that’s a low-probability scenario.”

The coronavirus has already had a complex effect on global trade, hitting tourism and retail sales in the huge Chinese market.

It has also caused the cancellation of industry events such as the tech sector’s annual Mobile World Congress in Barcelona, Spain.

The Financial Reporting Council (FRC), the UK’s accounting watchdog, has told the UK’s “Big Four” auditors to ensure they have plans in place to analyst the effect of the outbreak on firms with operations in China.

   
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