Fiat Chrysler halts production in Europe as coronavirus hits demand

By Giulio Piovaccari

MILAN (Reuters) – Fiat Chrysler Automobiles (FCA) is halting production for two weeks at most of its European plants to help protect staff against the coronavirus pandemic and adjust to a slump in demand, the Italian-American carmaker said on Monday.

Italy has been the European country worst hit by the crisis and the first to enforce a nationwide lockdown, which has now been replicated by Spain and, to a lesser extent, by France as the virus sweeps through the continent.

With all non essential services closed, including car dealers, and people forced home except for strict working needs, many forecast a heavy fall in car sales in March.

FCA – which according to analyst estimates produces around 25% of its vehicles in Europe – said the suspensions through March 27 would allow it “to effectively respond to the interruption in market demand by ensuring the optimization of supply”.

Marco Opipari, an analyst at Fidentiis, said a few weeks of closures was not a big problem in an over-supplied European auto industry and lost production could be recovered later on.

“The real problem is on the demand side, people are not buying cars now, and sales volumes are expected to be very bad in March, with a real impact on automakers’ earnings,” he said.

FCA said in a statement that production for its FCA Italy and luxury Maserati units would stop for two weeks, extending a temporary closure period already planned for some Italian facilities.

Affected plants are Melfi, Pomigliano, Cassino, Mirafiori, Grugliasco and Modena in Italy, Kragujevac in Serbia and Tychy in Poland.

The FIOM union said FCA’s decision was “necessary”.

The carmaker said the freeze would help it to resume activity promptly once market conditions allow it.

“The group is working with its supply base and business partners to be ready to enable our manufacturing operations to deliver previously planned total levels of production despite the suspension when market demand returns,” it said.

FCA’s decision follows similar moves by other Italian car and auto part makers, as the coronavirus outbreak deals another blow to a European automotive industry already struggling with weak global demand and tough new pollution regulations.

Italy is still allowing manufactures to operate provided they comply with strict safety measures. However, a growing number of companies are opting to suspend production.

Last week, luxury carmaker Ferrari said it was closing its two plants until March 27, citing an emerging shortage of parts. Premium brakes maker Brembo , whose clients include Maserati, said it would temporarily close its four Italian plants this week.

(Reporting by Valentina Za; Editing by Mark Potter)