Carmakers shut plants in Europe as coronavirus hobbles supply chains and dents demand

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The power plant at the headquarters of German car maker Volkswagen (VW) is pictured in Wolfsburg on February 28, 2020. - An important chapter in Volkswagen's years-long "dieselgate" emissions cheating saga was set to close on February 28, 2020, as the German car giant agreed an 830 million-euro compensation deal with domestic consumer groups. "We and the Federation of German Consumer Organisations (VZBV) have achieved a fair and verifiable settlement solution," VW board member Hiltrud Werner said. (Photo by Ronny Hartmann / AFP) (Photo by RONNY HARTMANN/AFP via Getty Images)
Power plant at Volkswagen HQ in Wolfsburg, Germany. (Ronny Hartmann/AFP via Getty Images)

Europe’s biggest automotive groups are shutting down plants across the continent as the coronavirus pandemic forces EU countries into almost complete lockdown. The move is a fresh blow to the car industry, which was already reeling from the mass closure of plants and collapse in car sales in China, where the virus originated.

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Now car companies face meltdowns in their supply chains as EU countries close their borders, as well as a drop in demand as European consumers fear for their health and jobs.

Fiat Chrysler (FCA.MI) said in a statement on Monday 16 March that it would halt operations at most of its European plants, from now until 27 March because of an “interruption in market demand.” The Italian-American automotive group said the manufacturing stop includes six factories in Italy, the EU country worst hit by coronavirus. Italy has had over 24,700 infection cases so far, and more than 1,800 people have died from the virus.

Italian sports-car maker Lamborghini will shut down production until 25 March, while rival Ferrari said it is maintaining a skeleton staff but production is continuing.

The PSA group (UG.PA), which includes Peugeot, Citroen, and Opel, said today it will close all its European plants, including in the UK, France and Germany for the remainder of the month too.

German car giant Volkswagen (VOW.DE) is also suspending production at a number of manufacturing bases in Europe, including in Slovakia and Spain. VW-owned Seat has shuttered its main factory near Barcelona for at least the rest of the month.

Read more: Germany shuts its borders as coronavirus paralyses public life

According to the Financial Times, Volkswagen may also be forced to curtail production at the main factory in its home town of Wolfsburg, because of running low on parts.

Supply chain and distribution problems now threaten all of Germany’s carmakers after the government shut down the country’s borders to all but essential traffic on Monday morning.

Marco Opipari, an analyst at Fidentiis, told Reuters that while carmakers could make up for drops in production, the bigger threat is the lack of demand for new cars. “People are not buying cars now, and sales volumes are expected to be very bad in March, with a real impact on automakers’ earnings,” Opipari said.