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Detroit itches to restart, but suppliers struggle with liquidity issues
Cars and other vehicles

Detroit itches to restart, but suppliers struggle with liquidity issues 


A “majority” of plants in the U.S. and Canada are restarting production Monday, May 18, on a single daily shift, with pickups and full-size SUVs being prioritized.
Workers will follow the same health and safety protocols that have resulted in no known cases of the virus at plants making medical supplies in the U.S. or autos in other regions.
High-traffic areas will be cleaned during and between shifts; most doors will be propped open to increase airflow and eliminate touch points.

Most plants resume limited production May 18; plants in Flat Rock, Mich., and Oakville, Ontario, restart Monday, May 25.
Plants previously running 3 shifts will temporarily have 2, and most other plants will have only 1 shift.
Cafeterias are closed, and time between shifts has been increased to limit employee interaction and allow for extra cleaning.

All North American plants are restarting May 18 except Belvidere Assembly in Illinois, which will reopen June 1.
Employees will have 10 minutes per shift dedicated to cleaning and disinfecting their workstations.
The company installed more than 2,000 hand sanitizer stations, redesigned or installed protective barriers on 4,700 job areas and workstations and added plexiglass partitions in break areas and cafeterias.

After a dispute with county authorities, Tesla was given the green light to fully reopen its Fremont, Calif., plant.
CEO Elon Musk defied authorities by restarting production last week, but no enforcement action was taken against him or the company.

As the Detroit 3 return to auto production after the COVID-19 pandemic interruption, their suppliers are still grappling with myriad roadblocks.

Restart delays among parts plants in Mexico, compounded by liquidity issues for lower-tier manufacturers, are roiling the supply chain as General Motors, Ford Motor Co. and Fiat Chrysler Automobiles prepare to reopen most of their North American vehicle plants on Monday, May 18.

Automakers last week touted their protocols for health and safety, saying they are now confident to restart this week after being shuttered over global coronavirus fears.

Earlier hopes of restarting this month went nowhere. But the Detroit 3 now appear to be all systems go to relaunch automaking in a COVID-19 new normal.

“We have had a variety of opportunities to learn about what makes for a safe operating environment,” Barry Engle, president of GM North America, told Automotive News last week.

“We believe that we have the procedures in place to ensure the safety of our people as they arrive for work, while they’re there with us and as they leave the facility.”

But Ford COO Jim Farley told analysts last week that while the new factory protocols are critical to the ramp-up, much still depends on the supply base.

“All of our production manufacturing operations rely on healthy suppliers, and their ability to start up is really critical,” Farley said.

Got cash?

But the new pressure on suppliers is exposing pain points. Chief among them: having enough cash to relaunch production lines.

“The financial liquidity of the industry is severely hampered right now,” Julie Fream, CEO of the Original Equipment Suppliers Association trade group, said during an Automotive News “Congress Conversations” webcast.

Fream: Have to get started

“Some suppliers, particularly the Tier 2s and Tier 3s we’re hearing from, are really starting to have some difficulty.”

Fream has been advocating alongside Michigan government leaders for federal aid for suppliers. Members of the Michigan congressional delegation last week appealed to U.S. Treasury Secretary Steven Mnuchin to provide financial assistance to auto suppliers, especially lower down the supply chain.

“We see just over 20 percent [of suppliers] having less than eight weeks of liquidity — meaning if the industry were not to run at all for eight weeks, they would be in dire straits,” Fream added. “It is a difficult time, and it’s all the more reason why we as an industry have to get started again.”

Mexico problems

Mexico’s supply base is presenting another threat to North American factories, with mixed signals coming from government officials there. Mexico is a large source of components and materials for U.S. vehicle assembly.

On Wednesday, May 13, Mexico’s federal government indicated the auto sector would reopen on Monday, May 18, and published guidance on how to proceed. But on Thursday, May 14, it published new instructions indicating the industry could not reopen until June 1.

On Friday, May 15, the government said Mexico’s industry can begin operating before June 1, provided companies have completed the process of establishing safety protocols.

Indeed, last week, Bloomberg reported that Daimler has been forced to stop vehicle production at its U.S. plant in Vance, Ala., because it cannot get adequate parts from Mexico. The Alabama plant was the first U.S. production line to resume operations during the pandemic.

“I have a feeling that the Mexico issue is not entirely beyond us yet,” warned Dietmar Ostermann, U.S. automotive advisory leader at PwC, during last week’s Automotive News webcast.

“I know that, certainly, the larger Mexican suppliers and the facilities of larger U.S. and European and Japanese suppliers in Mexico will implement the same safety standards. But I am very doubtful that smaller Mexican supply plants and Tier 2 supply plants will have the safety processes … and testing capabilities in place.”


There also are monumental issues regarding efficiency to grapple with, Ostermann said.

“We are trying to start up 200 vehicle programs in a matter of days or weeks,” he noted. “The likelihood that there are some hiccups with some Tier 1 suppliers or some Tier 2 suppliers is just very, very high.”

It’s a good thing, he added, that most assembly plants are only anticipating to resume at half of their normal production capacity.

“That, at least, gives us a little bit of a window,” he said.

It was not known last week whether compan- ies up and down the supply chain possess adequate personal protective equipment and testing capacity to put employees back to work.

Wilm Uhlenbecker, CEO of Brose North America, also wondered about how the new normal of factory procedures will affect production efficiency.

“We all have to adjust to the new normal in our factories and on the shop floor,” he said in the Automotive News webcast. “How does staggered shifts begin? Six-feet social distancing, all of these elements — how does that effect our efficiency on the line?”

Several suppliers noted varying degrees of ramp-up progress last week.

Carol Stewart, executive vice president at ADAC Automotive, the Grand Rapids, Mich., maker of vehicle door handles and exterior mirrors, said that while some ADAC plants have been running during the past two months to produce aftermarket parts, most are just now starting to ramp back up.

ADAC was operating at about 10 percent of capacity last week and expects to be at only about 20 percent this week. Stewart said ADAC’s primary roadblock has been state restrictions on manufacturing.

“Our biggest issue really was getting the OK for the OEMs to start manufacturing in Michigan,” she said.

A spokesman for ZF North America Inc. said only about half of its U.S. plants were in operation at the end of last week. And it will be the end of May before all of ZF’s North American plants are back in operation, the spokesman said.

“Financial assistance very well could be needed for the supply chain and we’re watching this closely,” the spokesman said.

Lear implemented new safety protocols and spacing measures at its seating plant in Flint, Mich.

Is it safe?

In a public demonstration of safety measures, Lear Corp. allowed the media into a seating plant in Flint, Mich., last week to see the new protocols firsthand.

Spacing efforts have been introduced into the plant to keep workers as far apart as possible. Personnel wore masks. Employees testified about feeling reassured of their personal safety.

“I came in shaking my head, but the level of thought they put into safety made me comfortable rather quickly,” one Lear employee told Automotive News sibling publication Crain’s Detroit Business. “It’s certainly safer here than the grocery store.”

Suppliers will need to be methodical with their restart, said Dave Andrea, automotive principal at Plante Moran.

“You have to run these processes for a while and see that you don’t violate the health protocols that everybody is agreeing with,” Andrea said. “You have to be overcautious on the health side but not get so burdensome that as soon as you put it into practice, people start saying, ‘I’m not going to do that.’ ”

Regardless, automakers intend to charge ahead this week.

“We will get to full capacity as fast as we can while ensuring a safe workplace within whatever constraints we may have,” GM’s Engle said.

“Our desire is certainly to get there as quickly as possible because we need it, especially on trucks.”

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