Has coronavirus impacted factories in Tennessee?
Quarantine not in effect long enough to stop supply chain
Tennessee factories run overtime shifts. New autos fill car lots. Stores are stocked.
Two months after China isolated the manufacturing city of Wuhan and the surrounding province of 60 million people, Americans are braced for shortages of everything from medicines to auto parts made in China.
While the coronavirus outbreak has reduced China’s industrial output, the quarantine meant to contain the Covid-19 threat hasn’t been in place long enough to empty the supply chain and disrupt the United States.
“We’ve been working maximum overtime in this plant,” said Mike Herron, chairman of United Auto Workers Local 1853, which represents 3,600 workers on General Motors vehicle and engine lines at Spring Hill, Tennessee. “Getting hold of parts has not been a problem.”
Tennessee, the No. 2 state for car and truck production, could feel the economy groan if imported components become scarce in its 100,000-employee automotive sector. Some experts don’t rule out a supply chain snarl. Two business executives writing in Harvard Business Review suggest parts shortages could roil U.S. factories within two weeks.
“We predict that the peak of the impact of Covid-19 on global supply chains will occur in mid-march, forcing thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the U.S. and Europe,” write technology entrepreneurs Pierre Haren and David Simchilevi, an engineering professor at the Massachusetts Institute of Technology.
Cutbacks have been rare this winter in the United States. Forewarned by disruptive events to the supply chain such as the SARS pandemic originating in China in 2002, the global Swine flu pandemic in 2009, Japan’s Fukushima Daiichi nuclear disaster in 2011 and Washington’s two-year-old trade war with China, many U.S. manufacturers learned to keep staples in close reach and in large amounts.
As a result, logistics executives often maintain materials to run plants for 60 days in case the supply chain breaks. For many U.S. factories, that 60-day buffer winds down in March.
“It could certainly affect product availability, but it’s too soon to tell,” said automotive analyst David Lewis of Motor Intelligence in Mahwah, New Jersey.
So far, most car lots are well stocked. Kent Ritchey, president of Memphisbased Landers Auto Group, said he was assured this week in meetings with officials at the automakers supplying the firm’s eight dealerships in the Memphis area and Jackson, Mississippi.
“Only one manufacturer would say there was even minimal impact and that was Nissan. They said they’d be down by 2,000 vehicles (nationwide), which is really minuscule” considering the company sold 1.3 million cars and trucks in the United States last year, Ritchey said.
Like car dealers, most major retailers are well stocked, even companies that rely on imported merchandise.
“We haven’t been impacted by the coronavirus,” said David Mckinney, spokesman for Memphis-based Autozone Inc., which operates more than 6,300 auto parts stores served by its megahubs stocking more than 100,000 items. “There’s been no negative impact on our supply chain.”
Even though the U.S. economy has powered along this winter, the global supply chain has come under scrutiny. It is an always-in-motion network of warehouses, ships, airliners, trains and trucks moving an endless array of finished goods and parts. Its present form took shape in the 1990s and 2000s as China and other Asian nations sent goods around the world in increasing amounts.
When the SARS pandemic broke out in 2002, China accounted for about 4% of the world’s production. Eighteen years later, China accounts for more than 16% and is considered the No. 2 economy in the world. The challenge of moving material over oceans has touched off conversations about relying less on the long supply chain bringing goods from China.
“There has been an uptick in conversations about pulling in the supply chain,” said Bob Hebner, vice president of strategic development at Meco Corp., a steel-products manufacturer at Greeneville, Tennessee.
Hebner notes clients accustomed to importing steel components are sounding out Meco for information. This hasn’t led to actual orders, although clients are starting to examine the supply chain.
“People are starting to ask us for more quotes,” Hebner said. “It started as a result of the trade war and it has continued with the coronavirus. In the last 30 days there’s been a flurry of new interest.”
One drawback has been the labor force. With the Tennessee unemployment rate measuring 3.3%, the lowest level in more than three decades, capable workers are in short supply.
“We have the capacity in the plant,” Hebner said, referring to the ability of machines to increase output. “It’s a matter of finding the labor to put on a 2nd shift or even a 3rd shift.’’
In Detroit, the United Auto Workers is also pressing the automakers to shorten the supply chain. Early reports of parts shortages proved false at GM pickup truck plants in Michigan and Texas, but union leaders continue to urge the manufacturers to return jobs to the United States, said Brian Rothenberg, UAW spokesman at the Detroit headquarters.
So far, the discussions have not led to firm plans, although there is wide understanding that General Motors officials have worked hard in recent weeks to make sure components keep flowing to the assembly lines. In some cases, airliners delivered parts in short supply.
“You have to give credit where it’s due,” said the UAW’S Herron. “GM has done a really fantastic job of managing and controlling the supply chain.’’