Volkswagen Doesn't Know How Bad This Will Get

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Volkswagen’s profits are tumbling, Bentley extends its production shutdown, and Ford hopes to possibly restart production with the help of wristbands. All that and more in The Morning Shift for April 16, 2020.


1st Gear: Volkswagen Withdraws Its Outlook For 2020

Companies typically provide guidance to investors on how they think they will perform in the coming months. Amid the coronavirus pandemic, a lot of them have said, simply, we don’t know. Add Volkswagen to that pack.

The company said today that it pretty much has no idea how it will do in 2020.

Also, profits are down big, via Reuters:

Volkswagen Group on Thursday withdrew its outlook for 2020 amid uncertainty related to the coronavirus outbreak which caused operating profit to drop 81% in the first quarter.

Operating profit fell to 0.9 billion euros, which would be an 81% drop from 4.84 billion last year, and the group’s return on sales margin is expected to be around 1.6%, down from 8.1% in the first quarter of 2019.

The full year outlook “can no longer be achieved”, Volkswagen said.

VW said negative fair value impacts from commodity derivatives and currency effects hit the first quarter 2020 result by 1.3 billion euros.

The company will reveal its first-quarter earnings on April 29. Its American sales report for that time period, though, came out earlier this month. In total, car sales were down 13 percent in the first quarter compared to last year.

2nd Gear: Small Suppliers Are Key To Manufacturing Restarting

The Financial Times has an interesting story this morning about how while automakers in Europe are gearing up to restart manufacturing, a lot of that is dependent on suppliers surviving. Per the FT:

The pace of the disintegration of auto supply chains has surprised even those who reinforced their procurement plans after the previous financial crash and the Fukushima nuclear disaster by identifying back-up contractors for every crucial component.

Continental, one of the world’s largest car parts maker and which makes everything from brakes to radios to augmented reality windscreens, said dozens of its 2,300 automotive suppliers were on the brink of collapse.


While car manufacturers and their largest component providers have access to multibillion-euro credit lines, capital markets and government loans, the network of smaller, often family-owned, parts makers that feed into the global automotive industry cannot afford to take on large amounts of debt.

“The situation is tough,” said Dräxlmaier Group, a German supplier that makes bespoke electronics, instrument panels and interior lighting for premium car brands around the world, and delivers directly to big auto plants.


The result of all of this is probably consolidation, as bigger suppliers buy out smaller suppliers who have less liquidity. This story is also a reminder of how unbelievably complicated automaker supply chains really are.

3rd Gear: Meanwhile In China

Ford sales are down there by 35 percent in the first quarter, according to Reuters. It’s a preview of how things might be here once things return, though Ford has been struggling there for a couple years now.

The automaker said, however, that its dealers in China have resumed operations and sales in March reached 75 percent of year-ago levels.

Ford has been trying to revive sales in China after its business began slumping in late 2017. Sales sank 26 percent in 2019, after a 37 percent drop in 2018. In 2017, its China sales fell 6 percent from a year earlier.

China’s auto sales dropped 8 percent in 2019 and are expected to fall more than 5 percent this year. Overall auto sales slumped 42.4 percent in the first quarter.


4th Gear: Meanwhile In America

Ford thinks wristbands could help it restart manufacturing, via Bloomberg. The bands would buzz whenever workers come too close to each other. They are currently being tested at a plant in Michigan, and are among other measures the company is taking to try to get plants going again.

A dozen Ford Motor Co. workers are experimenting with wearable social-distancing devices that could be deployed more widely once the company reopens idled manufacturing plants.

The small group of volunteers at a Ford factory in Plymouth, Mich., are trying out wristbands that vibrate when employees come within six feet of each another, said Kelli Felker, a company spokeswoman. The aim is to keep workers from breaching the distance that health experts recommend to avoid spreading the coronavirus.

The social-distancing wearable could be part of a broader array of new safety protocols Ford deploys as it resumes production as early as next month after at least a roughly six-week shutdown.

The automaker is also expected to subject all workers entering a facility to a thermal-imaging scan to detect a fever. And it will provide staff with masks and, in some cases, plastic face shields, Felker said. The company is devising the measures along with the UAW.


None of these things really solve for asymptomatic carriers of the virus, and even the six-foot guidance is probably questionable, according to The New York Times. As always, really fun to live in the giant deadly human science experiment that is 2020.

5th Gear: Bentley Will Shutter Its Plant For Longer

The company is adhering to governmental measures in Britain, which is on lockdown along with the rest of the world.


Via Reuters:

Luxury carmaker Bentley is extending its plant shutdown by three weeks and will begin gradually reopening from May 11, as coronavirus lockdown measures remain in place in Britain.

The United Kingdom has the fifth highest official death toll from COVID-19 in the world and its health minister has said it is too early to ease the most stringent restrictions on people’s movements in British peacetime history.

The Volkswagen-owned brand, which builds around 11,000 luxury models at its northern English Crewe factory, will begin a ramp-up with limited staffing from May 11 with full output due to recommence on May 18.

“As the threat persists, so must we with the robust safety measures put in place to ensure we protect as many people as we possibly can, now and when we return to full operations,” said boss Adrian Hallmark.


Reverse: RIP Arthur Chevrolet

On April 16, 1946, Arthur Chevrolet, an auto racer and the brother of Chevrolet auto namesake Louis Chevrolet, dies by suicide in Slidell, Louisiana.

Louis Chevrolet was born in Switzerland in 1878, while Arthur’s birth year has been listed as 1884 and 1886. By the early 1900s, Louis and Arthur, along with their younger brother Gaston, had left Europe and moved to America, where they became involved in auto racing. In 1905, Louis defeated racing legend Barney Oldfield at an event in New York. Louis Chevrolet’s racing prowess eventually caught the attention of William C. Durant, who in 1908, founded General Motors (GM). Chevrolet began competing and designing cars for GM’s Buick racing team. In 1911, Chevrolet teamed up with William Durant to produce the first Chevrolet car. The two men clashed about what type of car they wanted, with Durant arguing for a low-cost vehicle to compete with Henry Ford’s Model T and Chevrolet pushing for something more high-end. In 1915, Chevrolet sold his interest in the company to Durant and the following year the Chevrolet Motor Company became part of General Motors.


Neutral: What New Diversions Have You Taken Up?

Or have you doubled down on some old ones? I’ve been busy working my way through Kotaku’s 12 best games for the Nintendo Switch, currently playing Golf Story, which actually isn’t on that list anymore but I’ve been really enjoying.


Ash78, voting early and often

New diversion? If you have kids at home, you generally have less time than ever before.

So I’ve taken to teaching them multiple subjects at once to save time there.

Mathspañol: Dos mas dos vale cuatro! Muy bien.

Science/Literature: Look how bright Venus is tonight! It rains sulphuric acid all day. It’s like Mordor, or Dante’s Inferno or whatever.

Lab time: You have 10 minutes to find all the 10mm sockets under the hood of my car. GO!