Since it is truly a global economy, the continuing outbreak of the coronavirus in China is leading to supply chain problems for Nissan Motor Co. in its automobile manufacturing plants across the world, including in the U.S. Parts such as brake hoses and air conditioning components are in short supply as factories in China’s Hubei province, where the epidemic began, have closed down.
Chinese government officials, however, were hoping to get production back on-line in Hubei as early as Feb. 21, but Nissan fears that if parts aren’t moving by then, assembly plants in Japan could shutter by Feb. 23. Plants in the U.S. and Mexico could be next. One of Nissan’s main partners, Dongfeng Motors, makes its home in Hubei.
Hubei represents China’s fourth largest vehicle production center and, since each assembled automobile requires thousands of parts from different factories, any disruption can paralyze the entire supply chain. In fact, analysts have suggested that the coronavirus could cut production by as many as 1.7 million vehicles.
Nissan has already halted production in segments of its facilities in Kyushu Japan. These obstacles for Nissan come at a particularly inopportune time as the automaker is already facing a series of challenges which began when its chairman, Carlos Ghosn, was arrested in 2018 for misuse of company assets. And, recently, the manufacturer posted its lowest profit margins in ten years with stock market shares cratering to Great Recession levels.
Not surprisingly, the company is considering cutting back some 6,800 units in February with more reductions likely if problems with the coronavirus persist. Nissan is in discussions with the Chinese government for factories in Hubei to resume production as long as safety precautions are put in place to protect workers.
Currently, only slightly more than half of Nissan’s suppliers in China are at full production mode with many staying closed because they cannot get approval to open from the Chinese government.