PIRC Pirelli & C SpA

By Eric Sylvers and Ben Foldy 

Fiat Chrysler Automobiles NV and Peugeot maker PSA Group are stopping almost all car production in Europe while Volkswagen AG has shut factories in Italy and Spain, as global manufacturers try to protect workers from the spread of the new coronavirus and supply lines start to break down.

U.S. factories largely remain open, though some say that could change if part shortages become critical or public health guidelines change. Factories in the U.S. are starting to suffer as supply chain issues from products made in China and Europe continue to build. The Federal Reserve Bank of New York on Monday reported the sharpest drop on record for a state manufacturing index.

Meanwhile, some of Italy's biggest companies -- suddenly on the front lines of the outbreak -- are rethinking their assembly lines and other manufacturing processes to stay open. Similar re-evaluations are just now getting underway in the U.S., as the outbreak spreads there, too.

EssilorLuxottica SA, the French-Italian designer-eyewear manufacturer of brands such as Ray-Ban and Oakley, said over the weekend it is shutting its factories in northern Italy for several days to implement new worker-protection measures negotiated with labor unions. The company will be largely adopting Italian government guidelines aimed at minimizing staff and spacing workers at greater distances from one another in manufacturing sites and along assembly lines.

Factory employees will also have to wear masks and get their temperatures taken when entering the factory, among other measures, the company said.

In the U.S., executives and industry analysts are also now starting to think about how to adjust production schedules and experiment with changes. In Chattanooga, Tenn., Volkswagen is closing down its factory on Monday to allow workers to make arrangements amid closed schools.

"We will also take time to augment the already increased sanitary and deep-cleaning measures undertaken at our facility," a spokesman said. Production will resume Tuesday.

Ford Motor Co. said Monday it would extend a previously planned three-day shut down this week at its Valencia, Spain, plant to the entire week and then reassess the situation before resuming production. The company said that three cases of coronavirus infection have been confirmed within a 24-hour period. One of those confirmed affected a person who didn't enter the plant.

"We are taking quick action to follow the established protocol, including the identification and self-isolation of all employees who had close contact with the affected workers. We will take all other appropriate steps to ensure that risk from this situation is minimized," Ford said.

The United Auto Workers union and the three Detroit car makers -- Fiat Chrysler, Ford Motor and General Motors Co. -- said Sunday they were putting together a task force to adopt new procedures at their U.S. factories to better protect workers. Those include stricter visitor screening, additional social-distancing measures and increased cleaning of common areas.

"This is a fluid and unprecedented situation, and the task force will move quickly to build on the wide-ranging preventive measures we have put in place," the UAW and the car companies said in a joint statement.

Fiat Chrysler last week said it would also space out employees at workstations at its Italian plants, a move that it said would lower daily production rates. Monday morning, it took the more drastic step of closing down almost all manufacturing in Europe for two weeks.

The car maker said it would close six Italian factories that assemble Fiat, Jeep, Maserati and Alfa Romeo branded vehicles. The company is also shutting down a factory in Poland and one in Serbia that make Fiats. The company, which has about 65,000 employees in Europe, didn't say how many workers would be staying home due to the closures.

Like all companies in Italy, and in many other parts of Europe, Fiat Chrysler has most of its office-based employees already working from home. The factory workers forced to miss work due to the closings will get most of their salary through a largely government-funded scheme for companies in difficulty.

Fiat Chrysler last month temporarily halted production in its Serbian factory because it couldn't get parts from China. The factory closings announced Monday aren't linked to an inability to get parts, according to a person familiar with the situation. It is keeping open some smaller factories in Italy that make motors and other parts because in those plants it is easier to make adjustments to respect the minimum-distance requirement.

The factories being closed include one in the south making Jeep Renegades that are sent to North America. Fiat Chrysler imported a total of 98,429 vehicles from Italy to the U.S. in 2019, according to the International Trade Administration.

PSA, the Peugeot maker, said its plants in Madrid, Spain, and Mulhouse in the east of France would close on Monday. The rest of the car maker's plants in Europe would shut temporarily by Thursday at the latest. The French car maker has plants in Germany, Poland, Portugal, Slovakia and the U.K., as well as France and Spain.

Ferrari NV and Lamborghini, the luxury-car maker owned by Volkswagen, both closed their own factories in Italy over the weekend. Ferrari said it was experiencing supply-line issues, while Lamborghini's chief executive said in a statement that shuttering his plant was "an act of social responsibility."

Volkswagen, the world's biggest auto maker by sales, said Monday that it is becoming difficult to maintain production in its European factories because of disruptions to suppliers and national governments declaring emergencies. It said, however, that as the situation darkens in Europe, its production base is improving in China, where 31 of its 33 factories are now back online after weeks of being closed as the coronavirus pandemic gripped that country.

"While the situation in China is stabilizing, it is becoming more difficult in Europe," said Jörn Roggenbuck, a Volkswagen spokesman. "It is becoming more complicated to maintain supply chains."

Volkswagen's Lamborghini and Bugatti plants in Italy have halted production. In the wake of the Spanish government's declaration of a state of emergency, Volkswagen factories in Martorell and Navarra have shut down. The plants produce vehicles for SEAT and other Volkswagen passenger car brands.

As the coronavirus takes hold in the U.S., executives and analysts are considering changes there, too. Retooling assembly lines drastically, though, is especially tough for the U.S. auto industry, where there is little redundant capacity, said Brian Collie, director of automotive practice at Boston Consulting Group.

"Most vehicle manufacturers tend to manufacture a given model line on one line. Most suppliers for a given vehicle program tend to manufacture that out of one facility," he said. "So the question is what happens at that plant if somebody then gets the coronavirus? How do you then work through that?"

He says some manufacturers are limiting the number of visitors to sites, including suppliers. Paul Sura, vice president of business operations at Cypress Semiconductor Corp., which supplies electronic components to the industry, said the company is restricting factory visits.

"We're basically turning away any visitors. If customers want to come and audit us, which is a normal thing on a weekly basis, none of that is happening," he said. "It's all postponed at least two to three months. We're just not letting anybody in unless you have to be there to keep that factory going."

Write to Eric Sylvers at eric.sylvers@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

(END) Dow Jones Newswires

March 16, 2020 14:29 ET (18:29 GMT)

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