Business impact: Closed factories, canceled flights
The deadly coronavirus outbreak in China is hitting Bay Area businesses and limiting travel options — with effects felt closer to home now that the first case of the virus has been confirmed in Santa Clara County.
On Friday, the White House declared the coronavirus a public health emergency and barred entry of foreign travelers who had recently been in China. It also implemented a mandatory twoweek quarantine for U.S. citizens returning from Hubei province, the area where the virus first emerged. The news was felt immediately on Wall Street, where the Dow Jones industrial average fell more than 600 points, a 2% drop.
Tesla and Apple shuttered factories in China, raising the prospect of delayed production and reduced sales of cars and iPhones. Airlines canceled flights. Universities banned employee travel and study abroad programs. In San Francisco’s Chinatown, ban
quets that draw hundreds of people have been canceled, although the Lunar New Year parade is still planned for next weekend.
“Of course we all fear that the virus is going to spread to other areas,” said Hannah Kain, CEO of Alom, a Fremont company that helps businesses manage production, shipping and other parts of their supply chain. “It’s a very volatile situation looking day to day.”
The coronavirus originated in Wuhan, China, and has spread around the globe. It had infected almost 12,000 and killed 259 people as of Saturday, Chinese health authorities reported. It has led to a World Health Organization global health emergency, a State Department advisory against travel to China, and most recently, the White House emergency declaration.
With quarantines in effect, some Chinese factories have gone dark as workers stay home, Kain said. Companies extended the Lunar New Year holiday for an extra week, until Feb. 10.
Tesla delayed production of its Model 3 for at least a week after the Chinese government ordered its Shanghai factory to close, which may affect profit, Chief Financial Officer Zachary Kirkhorn said on a call with analysts to discuss company earnings this week. The Palo Alto company is also closely monitoring the delivery of supplies for Model Y cars built in Fremont.
Apple CEO Tim Cook told analysts this week that suppliers in Wuhan whose facilities were shuttered are alternate sources, and said that the Cupertino company is “obviously working on mitigation plans to make up any expected production loss.”
Delays in reopening those factories could affect production of products including iPhones and AirPods, said John Harmon, a senior analyst at Coresight Research.
The outbreak also could hurt sales in the huge Chinese market. Apple closed one retail store in Wuhan. Many stores that remain open have reduced hours, Cook said, and they are frequently cleaned. Employees are also checked for fevers.
Levi’s, which opened its largest China store in Wuhan in October, said the virus affected January sales. CEO Chip Bergh told investors on a call Thursday that the company has stopped all employee travel into and out of China and had closed half of its stores.
There are fears that the virus can spread through packages shipped from China, but the Centers for Disease Control and Prevention said there is no evidence of that. The virus is generally thought to spread through respiratory droplets.
“In general, because of poor survivability of these coronaviruses on surfaces, there is likely very, very low risk of spread from products or packaging that are shipped over a period of days or weeks at ambient temperatures,” the CDC said on its website.
Though only a single case of coronavirus has been found in the Bay Area, businesses said concern about its spread is already hurting sales.
Ding Lee, president of the local chapter of the Chinese Consolidated Benevolent Association, said several Chinatown restaurants have canceled holiday banquets that would typically attract hundreds of people. Restaurants are a big part of the economy in the historic neighborhood, and it will take a hit if more banquets are canceled, he said.
Yet those same fears are boosting other businesses. Weee, a Fremont grocery delivery company that specializes in Chinese products, saw its sales jump by 30%. Customers told the company they are trying to avoid going to places with crowds, including Asian supermarkets, CEO Larry Liu said.
Liu’s firm strongly encouraged its employees to cancel or postpone trips to China until the outbreak is contained. Employees who return from China are subject to a twoweek quarantine before they can return to the office, he said.
Many larger Bay Area companies have instituted similar policies, requiring employees to work from home for 14 days after returning from China.
Getting home may soon be harder. United Airlines announced Friday that it will stop flying to China next week until the end of March, including flights from its SFO hub. It will still run one daily flight to Hong Kong. China Southern Airlines canceled its three weekly flights from Wuhan to SFO after the Chinese government closed that city’s airport.
“The demand simply has gone down, nobody wants to fly there,” Kain said. Because of the official bans and corporate policies against travel, she said, businesses will be less able to monitor Chinese suppliers.
Other businesses that routinely send employees to China, such as consulting firms, will be less affected by the flight restrictions, because much of their work can be done remotely, said Vinod Aggarwal, a professor at UC Berkeley and director of the Berkeley Asia Pacific Economic Cooperation Study Center.
The Coast Guard is also monitoring large ships and getting advance notice for vessels that might have been in a coronavirusinfected port. Operators are required to report sick or deceased crew and passengers within the past 15 days to the CDC.
The cuts in flights and travel restrictions will hit tourism, a big industry in San Francisco and the Bay Area. As the Chinese middle class has grown, more tourists from more parts of the country take flights to San Francisco and pump money into the local economy, according to Sean Randolph, senior director of the Bay Area Council Economic Institute. More than 500,000 tourists came from China to San Francisco in 2019, according to San Francisco Travel.
Bay Area residents are also canceling personal trips. Lee of the Chinatown group had planned to take a cruise next week with stops throughout southeast Asia, including Singapore, Thailand, Cambodia and Hong Kong. But after several airlines canceled flights to and from China, Lee feared he would be isolated or quarantined upon his return. Instead of risking exposure, he chose to cancel the cruise — losing $6,000 on the nonrefundable trip.
“I had no choice,” Lee said. “Keeping our community safe, that’s the most important.”
Lee said he trusts the systems put in place to protect public health and hopes unfounded fears will not deter visitors from Chinatown.
“Chinatown’s still safe,” he said. “We can do as much as we can to cooperate with the government to keep our communities safe.” Chronicle staff writers Shwanika Narayan and Anna Bauman
contributed to this report.