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Carmakers Looking Beyond Extended Factory Closures

Ritujay Ghosh

On Apr 6, automakers Fiat Chrysler Automobiles NV FCAU and Honda Motor Co,. Ltd HMC announced that they are expecting to restart production in the United States and Canada in May. Most U.S. automakers had halted production in mid-March following the coronavirus outbreak and then extended the suspension till April end in view of the massive spread.

The suspension in production till April end comes after President Donald Trump last week extended the guidelines aimed at containing the spread of coronavirus till Apr 30. Death toll in the United States reached 4,758 on Monday but a drop in new cases in New York and other places may be an indication that the outbreak may have started to plateau.

The car companies had initially expected to resume manufacturing in April but now that the pandemic has taken an ugly shape in the United States, production seems unlikely to start before May. That said, this may be a good sign as many had expected the temporary halt in production to continue for an indefinite period, with coronavirus cases in the United States touching a new high last week.

Automakers Hopeful About a May Restart

Fiat announced on Monday that it expects to restart its manufacturing facilities in the United States and Canada beginning May 4. At the same time, Japanese carmaker Honda has extended its production suspension in the United States through May 1. Fiat also said that it has started working on redesigning its work stations so that social distancing is maintained among employees once production resumes.

The carmaker has also expanded the already extensive cleaning protocols at all its locations. Several carmakers in the United States have reopened, or will shortly reopen, many of their facilities, albeit on a limited scale. This is primarily to manufacture and make up for the shortage of ventilators that is hampering coronavirus treatment in the country.

Can Carmakers Bounce Back?

Most carmakers had earlier planned to resume production in April but that is clearly not happening anymore. Ford Motor Company F said last week that it believes around 600,000 industry auto sales is likely to have been lost in March following the coronavirus outbreak. General Motors Company GM too has shuttered all its plants in the United States. Tesla, Inc.’s TSLA production has also come to a standstill in the country. General Motors, Tesla, Ford and Honda each carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Times were already tough for the automobile industry, which was facing declining demand for passenger cars across the country. To make matters worse, it has started suffering due to the pandemic, with companies shuttering plants and sales plummeting.

However, May now looks to be the likely the time when carmakers can resume production. That, however, depends on how the United States progresses on containing the spread of the virus.

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