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Coronavirus: companies count the cost amid threat to Europe's car production

Mark Sweney and Jasper Jolly
Photograph: John MacDougall/AFP/Getty

Coronavirus shocks have rippled through the corporate world after a large airline imposed a hiring freeze, the world’s biggest whisky maker warned on profits and a factory shutdown in Italy threatened car production across Europe.

The German carrier Lufthansa has halted recruitment and is offering employees unpaid leave as part of cost-saving measures to limit the financial impact of the spread of the coronavirus.

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The cutbacks came as several other European companies warned that the outbreak was hurting their operations or introduced emergency measures to protect staff.

Sky said its offices would bar visitors who had been in high-risk countries in order to reduce the threat of contagion for its staff, with all guests required to complete a form at reception desks.

The Italian manufacturer MTA, which makes electrical parts for cars, has been forced to close its factory in Codogno after the Covid-19 outbreak in northern Italy. It said the closure would have a knock-on effect on production at Fiat Chrysler’s plants in the country before spreading to other carmakers across Europe.

The closure of the plant in the Lombardy region would immediately force Fiat to shut production lines at four plants as soon as Wednesday, MTA said. Continued closure would mean all the other Fiat plants in Europe and those of Renault, BMW and Peugeot would close from 2 March.

Jaguar Land Rover, the UK’s largest carmaker, and the lorry makers Iveco and CNH, would be affected if the shutdown lasted longer.

Diageo, the UK-based owner of Guinness and the world’s biggest whisky producer with brands such as Johnnie Walker, said Covid-19 could hit its profits by up to £200m as restaurants and bars in China stay shut.

The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the Wuhan coronavirus, for which there is no specific cure or vaccine.

The UN agency advises people to:

  • Frequently wash their hands with an alcohol-based hand rub or warm water and soap
  • Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing
  • Avoid close contact with anyone who has a fever or cough
  • Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers
  • Avoid direct, unprotected contact with live animals and surfaces in contact with animals when visiting live markets in affected areas
  • Avoid eating raw or undercooked animal products and exercise care when handling raw meat, milk or animal organs to avoid cross-contamination with uncooked foods.

Despite a surge in sales of face masks in the aftermath of the outbreak of the coronavirus outbreak, experts are divided over whether they can prevent transmission and infection. There is some evidence to suggest that masks can help prevent hand-to-mouth transmissions, given the large number of times people touch their faces. The consensus appears to be that wearing a mask can limit – but not eliminate – the risks, provided they are used correctly.

Justin McCurry

SSP Group, the British operator of restaurants and bars in airports and railway stations, said its sales across the Asia Pacific region would slump by half in February.

Related: FTSE 100 tumbles below 7,000 points as Diageo warns of £200m coronavirus hit - business live

Diageo predicted a decline in profits of £140m-£200m in the year to the end of June.

Sales are expected to be down by up to £325m. Its estimates excluded the impact of the coronavirus on other markets beyond Greater China and Asia Pacific.

Diageo said the majority of consumption of its products in China took place in bars and restaurants, which mostly remain closed.

“We have seen significant disruption since the end of January, which we expect to last at least into March,” it said. “Thereafter we expect a gradual improvement, with consumption returning to normal levels towards [June].”

The company also highlighted the impact in South Korea, Japan and Thailand, where events have been postponed, conferences and banquets have been cancelled and a drop in tourism has also had an impact on consumption in bars and restaurants.

The significant drop in international air travel, especially across Asia Pacific, has also hurt Diageo’s business, including sales in airports.

Danone, the maker of products including Volvic and Evian bottled water, and Activia yoghurts, said it would take a €100m (£84m) sales hit in the first quarter as a result of the spread of the coronavirus.

The French-based company was experiencing a “severe demand slowdown” for its Mizone water brand in China, which is Danone’s second biggest market and accounted for 10% of global sales last year.

Danone employs 8,200 staff in China and has eight factories, seven of which support its water business. The company said water production resumed on 17 February except for at its factory in Wuhan, which is at the centre of the outbreak.

SSP said in the Asia Pacific region, which generates 8% of group revenues, domestic and international air travel relating to China was down 90%, Hong Kong was down 70% and Singapore, Thailand, Taiwan and the Philippines were down 25% to 30%.

Its share price fell almost 4% on Wednesday morning and the company said group revenue would be down by £10m-£12m in February, with operating profits down £4m-£5m.