UK car factories running out of parts due to coronavirus, warns Jaguar

Jaguar Land Rover has warned it could run out of car parts at its British factories at the end of next week, as the coronavirus halts supplies from China.

Britain’s biggest carmaker added its voice to a chorus of companies counting the cost of the outbreak, as the outbreak weighs heavy on international business and trade.

“We are safe for this week and we are safe for next week and in the third week we have … parts missing,” said the JLR chief executive, Ralf Speth. He added: “We have flown parts in suitcases from China to the UK.”

Apple is the best bellwether for the coronavirus fallout

Speth added that the company is currently making no sales in China, one of its most important markets.

Apple cut its sales forecasts on Monday and could be set for further pain after its major iPhone supplier said quarantine protocols mean it is struggling to squeeze as many workers into its factory dormitories as usual.

Elsewhere, Parisian fashion house Chanel said it had shelved an upcoming Beijing fashion show over coronavirus fears.

As the fallout spreads, a series of companies and politicians conceded that disruption to day-to-day operations is inescapable:

  • HSBC said it expects its sizeable Asian operations to take a financial hit in 2020

  • The world’s largest miner BHP said global demand could slow

  • South Korea proposed emergency steps to protect its economy

  • Wall’s and Richmond sausages firm Kerry Group warned on revenues

  • The UK accounting watchdog told UK firms to assess the impact of the virus on their business

  • Energy services group Tekmar slashed its profit forecasts.

Speth said JLR has enough parts from China to maintain its British production for the next two weeks but not beyond.

The firm has three UK plants – Halewood on Merseyside, and Castle Bromwich and Solihull in the Midlands – but did not say if they might have to close or reduce production.

What is the coronavirus and should we be worried?

The virus is officially called Sars-CoV-2 and this causes the disease Covid-19. It is a member of the coronavirus family that has never been encountered before. Like other coronaviruses, it has come from animals. Many of those initially infected either worked or frequently shopped in the Huanan seafood wholesale market in the centre of the Chinese city.

New and troubling viruses usually originate in animal hosts. Ebola and flu are other examples – severe acute respiratory syndrome (Sars) and Middle Eastern respiratory syndrome (Mers) are both caused by coronaviruses that came from animals. 

The virus can cause pneumonia. Those who have fallen ill are reported to suffer coughs, fever and breathing difficulties. In severe cases there can be organ failure. As this is viral pneumonia, antibiotics are of no use. The antiviral drugs we have against flu will not work. If people are admitted to hospital, they may get support for their lungs and other organs as well as fluids. Recovery will depend on the strength of their immune system. Many of those who have died were already in poor health.

China’s national health commission has confirmed human-to-human transmission, and there have been such transmissions elsewhere. As of 12 February there are now 45,182 confirmed cases and 1,115 deaths. There are cases in 28 other countries outside China, with deaths recorded in one case in Hong Kong, and one case in the Philippines. The number of people to have contracted the virus overall could be far higher, as people with mild symptoms may not have been detected.

The number of confirmed cases of coronavirus in the UK has doubled from four to eight after four more people in Brighton were diagnosed with the infection over the weekend.

There are nine cases of the virus in the UK. Four were located in Brighton, one in London. At Arrowe Park Hospital in Merseyside 83 people in quarantine were told they would be allowed to leave on Thursday after they all tested negative. Of the 1,750 tests carried out so far in the UK, more than 99% had been negative.

We don’t yet know how dangerous the new coronavirus is, and we won’t know until more data comes in. The mortality rate is around 2%. However, this is likely to be an overestimate since many more people are likely to have been infected by the virus but not suffered severe enough symptoms to attend hospital, and so have not been counted. For comparison, seasonal flu typically has a mortality rate below 1% and is thought to cause about 400,000 deaths each year globally. Sars had a death rate of more than 10%.

Unless you have recently travelled to China or been in contact with someone infected with the virus, then you should treat any cough or cold symptoms as normal. The NHS advises that people should call 111 instead of visiting the GP’s surgery as there is a risk they may infect others.

Health experts are starting to say it could become a pandemic, but right now it falls short of what the WHO would consider to be one. A pandemic, in WHO terms, is “the worldwide spread of a disease”. Coronavirus cases have been confirmed in about 25 countries outside China, but by no means in all 195 on the WHO’s list.

There is no need to panic. The spread of the virus outside China is worrying but not an unexpected development. The WHO has declared the outbreak to be a public health emergency of international concern, and says there is a “window of opportunity” to halt the spread of the disease. The key issues are how transmissible this new coronavirus is between people and what proportion become severely ill and end up in hospital. Often viruses that spread easily tend to have a milder impact.

Sarah Boseley Health editor and Hannah Devlin 

“If you think back to the Japanese earthquake and tsunami, there were critical parts coming from Japan, so Japanese producers shut down in the UK,” said Prof David Bailey, of Birmingham Business School. “It depends whether they have second sourcing agreements to get parts elsewhere and whether they can flex those.”

Smartphone maker Apple has been among the hardest hit of the world’s major companies. It said on Monday night that the coronavirus may have shaved billions of dollars off global sales.

Apple said it may not hit its sales forecast of between $63bn (£48bn) and $67bn for the quarter ending this June, citing uncertainty caused by the epidemic.

Its key iPhone supplier Foxconn has switched some of its production to making surgical masks instead of smartphones, but is reportedly struggling to get its production lines back up to speed.

It usually fits eight workers into each dormitory at its factory in Zhengzhou but quarantine measures mean each now has to have their own room, the Financial Times reported.

Craig Erlam, senior market analyst at OANDA Europe said Apple’s forecast was “likely the first of many profit warnings as the coronavirus continues to wreak havoc in the world’s second largest economy”.

Analysts have suggested that Apple’s South Korean rival Samsung could benefit from the US firm’s supply chain issues. But the South Korean domestic economy is far from isolated from the outbreak’s effects.

A day after economic forecasters warned Japan is facing a recession due to regional disruption to trade, South Korea’s president, President Moon Jae-in, told members of his administration that the country needed to take “emergency” steps.

Businesses worldwide count cost of coronavirus outbreak

George Magnus, associate at Oxford University’s China Centre, said: “The knock-on effects from Chinese demand grinding to a halt are most acute for Hong Kong, but also for Australia, Japan, South Korea, Taiwan, Malaysia, Thailand, Singapore – and Brazil as a commodity producer.”

He said affected economies would recover from the impact quickly if restrictions imposed by Beijing are lifted within a few months.

“But if it turns out that China sustained the clampdown regime into the early summer or beyond, then the cumulative effects would increase significantly,” said.

“A Chinese recession – unheard of – would send shockwaves through the world economy. Hopefully though that’s a low probability scenario.”

The coronavirus has already had a complex effect on global trade, hitting tourism, retail sales in the huge Chinese market and global supply chains for industries such as the automotive sector.

It has also caused the cancellation of industry events such as the tech sector’s annual Mobile World Congress in Barcelona, Spain.

The latest global name to cancel its plans was Chanel, whose models were due to show off its latest designs at a show in Beijing in May.

Chanel said the 31 rue Cambon 2019/20 Métiers d’art collection, which has already been shown in Paris, would be displayed at a “later and more appropriate moment”, but did not give a new date.

“At the foremost are the health and well-being of its teams and clients,” the company said.

The Financial Reporting Council (FRC), the UK’s accounting watchdog, has told the UK’s “Big Four” auditors to ensure they have plans in place to analyst the effect of the outbreak on firms with operations in China.

A string of companies offered updates alongside their financial results.

Uncertainty about the length of the crisis is one of the largest hurdles, according to HSBC, which said on Tuesday that disruption for staff, suppliers and customers could hurt profits in 2020.

Group chief financial officer, Ewen Stevenson, said: “We expect to take additional loan loss provisions as a result of the coronavirus and the weakened outlook for the Hong Kong economy.

“I think it’s really a call on how long does it take to contain the virus, and certainly some of the latest data has given us more optimism on that over the last week or so.”

Fiat warns coronavirus could force closure of European plant

The chief executive of BHP, the world’s largest mining group, said the company could be affected by falling demand if the virus is not contained by the end of March.

As a major supplier of raw materials, BHP’s fortunes are affected by economic growth patterns, particularly in large economies such as China.

Irish food ingredients company Kerry Group, which makes Wall’s Ice Cream and Richmond sausages, said its Chinese revenues were likely to slump by 30% in the first quarter of the year. It has five factories in China and has been operating with a skeleton staff, it said.

Holiday Inn owner InterContinental Hotels Group has closed or partially closed 160 out of its 470 hotels in mainland China and said it expects a short-term hit from the outbreak.

The company said in January that it would allow customers to change or cancel stays in China, Macau, Hong Kong and Taiwan up to 3 February, at no additional cost.

Shares in Tekmar, a tech firm that serves offshore energy projects in China, fell by more than 20% after it cut profit forecasts, citing disruption to its shipments and supply chain.

China accounts for 10% of its expected revenues. Chairman Alasdair MacDonald said the effect on the business had been “unpredictable and rapid”.

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