On March 18, at about 4:30 p.m., the employees at auto supplier Dana Inc. in Warren, Mich., received an unsettling text message from management.
The text, obtained by the Free Press read, “We are well aware of the Ford, FCA and General Motors announcement,” referring to the Detroit Three’s decision earlier that day to temporary shutdown all North American assembly plants because of the coronavirus pandemic.
“Dana is reacting to our customers. Dana is currently evaluating the situation and will make a final determination as quickly as we can,” the text read.
At noon the next day, dozens of day-shift workers stared at a newly posted schedule that was nearly blank.
“It showed we’d have the whole week off starting Friday until the 30th. There was nothing on it, but a few spots on day shift … and it’s voluntary,” said Arron Drescher, who’s worked at Dana Warren for five years.
A spokesman for Dana confirmed it is adjusting production schedules, idling some factories, and managing controllable costs, while working to keep employees safe. He would not comment on the plant in Warren.
Many suppliers have made the difficult decision to send workers home and run on partial shifts or not at all. In part, it’s to protect their employees’ health. But it’s also because their biggest customers — the car companies — idled production after the UAW pushed to protect workers.
No one knows when that new-car production will resume, especially in light of Gov. Gretchen Whitmer’s order Monday mandating most people stay at home through April 13. A UAW memo to workers at General Motors’ Bowling Green plant in Kentucky Tuesday said the restart date was pushed back to April 14 from April 6.
Another looming question is if consumer demand will be there whenever production does restart considering the widespread economic impacts of the pandemic.
“That will have a significant impact on suppliers,” said Jeff Schuster, president of Americas Operations and Global Vehicle Forecasts at LMC Automotive. “On the demand side, our U.S. forecast is sales will be down this year by 3 million units versus last year. A week ago, we were predicting sales would be down 500,000 to 1 million units.”
All of this means several suppliers face the daunting task of keeping their businesses in the black while the workforce, though glad to be safe, wonder if they will have jobs when operations return to normal.
No panic, yet
Kirchoff Automotive in Tecumseh filed a Worker Adjustment and Retraining Notification with the state saying that because of the Detroit Three’s factory shutdowns, it tentatively laid off 338 employees effective March 20. Kirchoff, which makes metal and hybrid structures in body-in-white, crash management systems, chassis applications and cross car beams, said it is unclear when production will restart.
“I’m not going to panic,” Drescher said about Dana’s shutdown. “It will probably get scarier if it lasts longer. Which is why I think everyone should just stay home and the faster it’ll blow over. But it might take a few weeks or even a month.”
Drescher is full-time at Dana’s plant in Warren. Dana is based in Maumee, Ohio, near Toledo. It makes axles, drivetrains and transmissions, among other parts. It employs 36,000 people globally with sales of $8.6 billion last year, according to Dana’s website.
The Detroit Three are customers, with Ford Motor Co. the biggest accounting for 20% of Dana’s sales last year. Fiat Chrysler was the second biggest at 11% of sales and GM accounts for 3%, Dana’s website said.
In her job, Drescher runs a machine that makes parts and axles. She opted out of volunteering to work because she fears getting coronavirus. In many factory jobs, workers often assemble cars and parts in close confines with their co-workers, making the social-distancing six-foot-rule hard to follow.
Also, Drescher has less seniority than others who already raised their hands.
“Some people have a lot of bills, so I’m not mad at them if they were the ones able to work and signed up for the volunteer,” said Drescher, who’s single without children.
‘One day at a time’
Like Dana, Magna International decided last Thursday to temporarily idle work at “a number” of its 348 locations around the world except China. In a statement, Magna said, “We continue to assess our operations on an individual basis.”
One of those plants is in Spring Hill, Tennessee. It makes car seats for GM’s Spring Hill Assembly plant where GM builds the GMC Acadia, Cadillac XT5 and XT6 SUVs.
“So if they shut down, we’re affected immediately … to an hour after they’re shut down,” said an employee at the plant who declined to be named for fear of retaliation for talking to the media.
The factory is idled through March 30th “based on customer schedules,” said Tracy Fuerst, Magna’s vice president of corporate communications.
The employee said he is relieved to not have to go in and risk getting sick. But the man, in his late 20s, has a wife and family to support . He will miss his $550 to $780 a week paycheck.
“I’m taking it one day at a time,” he said. “Yesterday, I made the decision to start cancelling non-essential bills, just making sure I prepare myself for the worst. I canceled Netflix, Hulu, Amazon, cable and even my car insurance. I’m looking at limiting my phone bill. We’re cutting down significantly.”
Cash is king
Employees aren’t the only ones concerned. So are the bosses.
“It’s all about liquidity, access to cash and hunkering down and getting through this,” said Eric Showalter, CEO of Myotec in Farmington Hills. “Then we’ll worry about the profits-and-loss statement. I can tell you probably everyone right now is looking at liquidity, not earnings.”
Indeed, both Ford and GM have said they will draw down billions on their revolving credit facilities to stockpile cash amid the uncertain market conditions.
On Friday, Showalter put three of Myotec’s stateside plants on suspension for at least one week and furloughed one in Pennsylvania for a day. The down plants are in Knoxville, Tennessee, Macomb County and Manistee. Myotec has about 300 employees in the United States, 200 of them are in Michigan, Showalter said.
Myotek makes small lamps and fog lamps for many automakers including GM and Fiat Chrysler Automobiles. It also makes magnesium parts for those headlamps, which is what GM was looking for to help in its effort to build ventilators for hospitals. Myotek’s annual revenue is about $185 million, Showalter said.
“Almost all our customers are down this week so we’re trying to manage this with our people,” Showalter said. Employees are using vacation time and paid time off, “so we can keep everyone on board and work through this.”
Myotec shut down its two plants in China for four weeks during the coronavirus outbreak there. It had no workers get the illness and has done a slow ramp up. It is now at 90% production at both plants, Showalter said.
Showalter is familiar with working through a crisis, he was CEO of auto supplier Meridian Lightweight Technologies Holdings Inc. in Plymouth in 2008 and 2009 when the Great Recession hit and GM and then-Chrysler Corp., filed for Chapter 11 bankruptcy protection.
“So I’ve been through this,” said Showalter. “We’re trying to figure out how to maneuver here so we preserve the health of the company, so employees have a company to come back to. I’d say we’re a tad worried now.”
His concerns center on when Myotec can get back to work and how will the federal government respond to this crisis.
“How will this effect auto demand and our business activity? Those of us who went through 2009, we’re all talking about the same things we talked about in 2009,” said Showalter. “We don’t know if this is another 2009, but that’s our reference point. Mental flexibility is key to this — keep your options as open as you can.”
‘We’ll get through this’
Meridian employs 2,000 people globally, 400 in Michigan, said Joe Petrillo, director of business development.
The company, a leading global supplier of lightweight cast metal parts mostly for the auto industry, has operations in Eaton Rapids, Canada, Mexico, Europe and two plants in China. As of Sunday, operations continued at many of its facilities.
“We’re keeping our workers employed and we’re waiting to see what happens next, we’re primarily an auto supplier and we really follow the guide of the Detroit Three and others globally,” said Petrillo.
But Petrillo is nervous about recovery for all auto suppliers.
“Obviously, when this is a sudden stop to the economy it’s gonna hurt,” Petrillo said. “From our history in China, it does come back. We know this is temporary and if we follow the right practices, things will get back. There’ll be a short term hit if you think of the financials, but we’ll get through this.”
Other big suppliers are going day to day.
A spokeswoman for BorgWarner, which builds powertrain systems, was unclear about the status of its plants, calling it a “dynamic situation that is changing by the hour.” She said employees that can work remote are doing so. BorgWarner reported $10.2 billion in sales last year.
The Bosch Group, based in Germany, provides technology to automakers. It has some plants down based on region and a spokesman said it is “continuously fine-tuning our response.”
In the United States and Canada, Bosch has a program to pay non-exempt hourly workers who are affected by any shutdowns. Other non-production employees work remotely. Bosch has about 400,000 global employees and its 2019 sales were 77.9 billion euros or $83.7 billion.
Hoping for no layoffs
For smaller auto suppliers such as Lucerne International in Auburn Hills, CEO Mary Buchzeiger told most of her 20 employees on March 16 to work from home.
She, her CFO and a couple workers were coming in to do light assembly and repackaging, though with shipments several days behind in schedule, the workload is light. That presents her with a heavy burden as to what this pandemic will do to the bottom line.
“If people are saying they haven’t been impacted, they’re crazy,” Buchzeiger said. “It has impacted us.”
Lucerne sells about $50 million worth of parts each year. It has 16 plants in Asia where it fabricates auto parts using steel and aluminum before shipping them back to the United States for final production for its various automaker customers.
Fortunately, Lucerne trimmed down its costs last year, to be in good financial shape to survive a downturn, Buchzeiger said. But she asks the question many are asking, “How long is too long?”
“I would really like to keep everyone on my payroll and not have to lay anyone off,” she said, adding that Lucerne is paying all employees while the company waits to resume business.
“They have small kids at home and I can’t in good conscious just send them to wait in the unemployment line — so we’re taking care of them,” Buchzeiger said.
She will take advantage of any government programs and tax credits to offset the cost of employees not working.
‘Employee owned’
Twin City Die Casting in Minneapolis has two things going for it during this crisis: diversification and it is an employee-share-ownership company or ESOP. So because the 225 employees have a stake in the revenues they act in their best interest and “they did not it shut down,” said Tim Olson, CEO
About 20% of its sales comes from making parts for medical devices, helping offset the loss of auto sales, which comprise 60% of its sales, at the moment. In fact, it’s helping GM in its quest to help Ventec build more ventilators faster.
Still, the auto industry supports the bottom line, yet production restart dates and consumer demand there remain murky.
“That’s a big concern. The downturn in 2008, 09, 10, it was very tough on the industry,” said Olson. “I would expect automotive demand to end up being the same as in that downturn. We’re trying to figure out everything we can do to protect the business.”
And even once the automakers get production back online, it will take time for business to resume to a healthy level, analysts said.
“It does take some coordinating to communicate and get the workers back,” said Schuster. “This behaves like a wide-spread strike in the sense that it shuts everything down, but the factory is ready to go. You can’t just flip the switch and get everything running because you have tiers that each have to get up and running.”
Schuster added, “At this stage, no one escapes this from a financial impact.”
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