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Automakers in China gradually reopen after virus shutdown

Posted on Monday, February 17th, 2020 By Joe Mcdonald, AP Business Writer


In this Feb. 13, 2020, photo, masked workers assembly wiring for automobile at a factory in Qingdao in east China's Shandong province. Automakers are gradually reopening factories in China that were idled by anti-virus controls as they try to reverse a sales slump in their biggest market. (Chinatopix via AP)

BEIJING (AP) — Automakers are reopening factories in China that were idled by anti-virus controls as they try to reverse a sales slump in their biggest market.

Local officials have orders from the ruling Communist Party to get businesses functioning again while still enforcing anti-disease curbs that shut down much of the world’s second-largest economy.

“Local governments are putting their full weight behind helping businesses open,” the president of the American Chamber of Commerce in Shanghai, Ker Gibbs, said in a statement.

Toyota Motor Co. said two factories reopened Monday with one of the usual two daily shifts working. Volkswagen AG, Ford Motor Co., Mercedes Benz and Chinese brand Geely resumed some operations last week. General Motors Co. said a “staggered start” across its factories began Saturday. Nissan Motor Co. plans to restart this week.

Automakers say they are checking employees for the virus's telltale fever, barring visitors and telling employees to stay home if they have been in Wuhan, the city at the center of the outbreak, or other areas that have imposed travel curbs.

The outbreak prompted the government to extend the Lunar New Year holiday to keep factories and offices closed and workers at home.

The government has told employees who can work from home to stay there, but China’s vast manufacturing industries that supply the world with smartphones, toys and other goods need workers in factories.

Obstacles include a requirement for workers who return from other areas — as millions are doing after the holiday — to make sure they are virus-free by staying at home for its 14-day incubation period.

“Most factories have a severe shortage of workers, even after they are allowed to open,” said Gibbs. “This is going to have a severe impact on global supply chains that is only beginning to show up.”

Automakers are under pressure to reverse a 2-year-old sales decline in a Chinese market they hope will propel global revenue.

Sales of SUVs, minivans and sedans hit an annual peak of 24.7 million in 2017 and have declined since then. Last year’s sales tumbled 9.6% to 21.4 million.

The virus “adds to the challenges that the sector is already facing,” said Fitch Ratings in a report.

Groupe Renault said one of its factories in the southern city of Guangzhou, near Hong Kong, reopened Monday but the French automaker gave no indication of the status of another factory in Wuhan.

Sales of vehicles are likely to be depressed through April, Fitch said. It said production might fall by the high single digits in the first half of 2020 compared with a year earlier.

GM, Toyota and others said the pace of production depends on how fast they can restart the flow of components from thousands of Chinese suppliers that also shut down.

That disruption could have global repercussions: UBS estimates China supplies 8% of auto parts exports worldwide.

___

AP Business Writer Yuri Kageyama in Tokyo contributed.

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
General Motors (GM)$21.51+10.0%7.07%4.70Buy$40.46

6 Stocks That May Not Survive the Coronavirus

Companies that are in a shaky financial position may sometimes attract investors in a bull market. Traders seeking a short-term profit can often use an oversold condition to capture a quick gain. But in a bear market, these companies frequently are left on the sidelines.

But a declining stock price by itself should not be enough to scare investors off. What investors really need to pay attention to is the company’s ability to finance existing debt or take on additional debt. Companies with low credit ratings face the problem of having too much debt on their books and an inability to finance it at more favorable rates.

That’s one reason we’ve put together this presentation that highlights 6 companies that may not survive the coronavirus. These companies have low stock prices. In fact, many of them are, or will be, in danger of being delisted if they cannot bring their stock above the $1 threshold. And on top of that, these companies each carry credit ratings of CCC+ or lower and are at risk of seeing those ratings even go lower.

Each of the companies presented here are considered to be among the weakest, if not the weakest, in their sector. If you have any of these falling knives in your portfolio now is the time to cut your losses and walk away.

View the "6 Stocks That May Not Survive the Coronavirus".

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