VW delays possible restart of Mexico plants

MEXICO CITY — Volkswagen Group will extend until at least May 18 a suspension on operations at its Puebla production plant in Mexico due to the ongoing coronavirus pandemic, the company said in a statement on Friday.

The German automaker’s Silao plant in Mexico is also temporarily down, and the company said it has not yet determined when it might resume operations.

The eventual restart at both plants will be “gradual and under strict hygiene measures,” the statement added.

Volkswagen is among manufacturers worldwide who are responding to a steep fall in demand, as well as supply chain challenges following public health measures adopted by governments to rein in the pandemic.

FCA to resume work on Jeep plug-in hybrids at Melfi plant on Monday

MILAN — Fiat Chrysler Automobiles wants a portion of its workforce to return to its factory in Melfi, southern Italy, starting Monday.

They will prepare the facility for the final development of the new plug-in hybrid versions of the Jeep Compass and Renegade, a union representative said on Friday.

Marco Lomio, of the UILM union, said the automaker had informed unions that workers would have to complete cars left unfinished on Melfi’s assembly lines when the plant was shut in mid-March following rules imposed by Rome to stem the coronavirus spread.

“We will start with 500 people on Monday and we will peak on Wednesday with about 1,000 workers,” Lomio said.

This would then allow FCA to have lines free to build prototypes of new variants of the Compass and Renegade, he said.

An FCA spokesman declined to comment.

The partial restart of operations at Melfi, which normally employs 7,400 workers, adds to FCA’s plan to resume van production in Atessa, central Italy, a week before a national lockdown imposed by the Rome government is officially due to end.

About 6,000 Atessa workers out of a total of 6,500 are expected to be back to work on Monday, according to a source.

Like it did for the Atessa factory, FCA has sought a green light to restart the Melfi plant from local authorities, relying on their tacit consent, as it makes use of a provision in Italy’s lockdown laws that allows companies with activity that can be linked to “essential” sectors to reopen, Lomio said.

Building prototypes of new hybrid cars is considered part of R&D activities, deemed essential by the government.
Lomio said FCA would probably restart developing those prototypes starting on May 4.

He added that, following production stoppages linked to the virus emergency, FCA likely would not be able to start selling the hybrid versions of the Compass and Renegade until September. The automaker’s plan prior to the outbreak was to start in July.

Jaguar Land Rover restarts some Europe production to meet China demand

LONDON — Jaguar Land Rover will begin building cars again in Europe next month as customers return to showrooms in China, a key market for the UK automaker.

JLR’s plants in Solihull, England, and Nitra, Slovakia, will resume production on May 10, the company said in a news release on Thursday.

Contract manufacturer Magna Steyr will also restart production in Graz, Austria, on the same date, as will JLR’s engine factory in Wolverhampton, England.

The production restarts are linked to the linked to the improving Chinese car market. “In China, we are beginning to see recovery in vehicle sales and customers are returning to our showrooms,” JLR said.

JLR’s Solihull plant builds the Range Rover and Range Rover Sport large SUVs, traditionally JLR’s biggest money earners.

Magna Steyr builds the Jaguar I-Pace full-electric crossover.

The reopening of the Nitra factory means production will resume of the new Defender off-roader, which is built there. Deliveries are due to start this summer.

JLR’s plants in Halewood and Castle Bromwich, both in England, will remain shut for the time being. The plants build models that are also produced in JLR’s Chinese plant in Changshu. The Changshu factory reopened in February.

“As countries are relaxing distancing guidelines and retailers are reopening around the world, the restart of production at our other plants will be confirmed in due course,” the automaker said.

JLR was one of the last automaker to halt production in Europe when it closed its plants from the week beginning March 23.

It said it would reopen its remaining plants when buying conditions improve. “As countries are relaxing distancing guidelines and retailers are reopening around the world, the restart of production at our other plants will be confirmed in due course,” the company said.

JLR said it is putting in place new “robust” health and safety measures to protect workers, adding it would “adopt strict social distancing measures across our business.”

Renault to restart output at French factory

PARIS — Renault will restart operations next week at its factory in Flins, France, where it builds the Renault Zoe electric small car and the Nissan Micra small hatchback.

It will be the first Renault assembly plant to start up again after the automaker closed European factories in mid-March as governments imposed restrictions on movement to limit the spread of the coronavirus. 

Renault’s other French car plants will resume production in May, a spokeswoman said Wednesday.

Three component factories in France — the engine plant in Cleon, chassis component plant in Le Mans, and a reconditioned spare parts plant in Choisy-le-Roi — resumed work on a limited basis this week. The sites employ a total of more than 5,000 people, although no more than 10 percent are working now, Renault said. 

Workers at the plants have been on temporary unemployment, with the French government reimbursing up 84 percent of gross salaries.

The assembly line at Flins will open, likely on April 28, with about 25 percent to 30 percent of the site’s 2,600 employees, as safety procedures are tested for effectiveness, Renault said. The automaker would not give details on which models would be built or how many would be made at first. 

Renault signed a “solidarity contract” with workers at the beginning of April that provided for safety procedures to be put in place, and also contained provisions on potential overtime and irregular working hours, to give flexibility to meet uncertain demand.

Workers at Flins will follow safety protocols including wearing face masks, having their temperatures taken and maintaining at least 1 meter of distance as they work.

A delegate for the CFDT union told Agence France-Presse that workers would be trained in safety measures first before working on the line. The delegate, Franck Daout, added that there was a full order book for the Zoe at Flins and that “buyers were awaiting delivery of their cars.”

Renault sold 45,811 Zoes last year in Europe, an increase of 20 percent over 2018, when 38,140 were sold. Sales were running at an even higher pace this year, with electric vehicles key to meeting new fleet emissions targets. Renault sold 16,025 Zoes in the first two months of this year.

There were 64,257 Nissan Micras sold in Europe in 2019, a decrease of 15 percent from 2018, according to figures from JATO Dynamics. The two cars are built on the same production line at Flins.

Other Renault Group plants across Europe are slowly coming on line, including a transmission plant in Cacia, Portugal; an engine factory in Valladolid, Spain; the Avtovaz Lada factory in Russia; and Dacia’s huge complex in Mioveni, Romania, which started powertrain operations this week.

PSA opens door for possible revision of FCA deal dividends

PARIS — PSA Group has laid the groundwork for a possible revision of the terms of its combination with Fiat Chrysler Automobiles.

PSA and FCA agreed in December to each pay an ordinary dividend of 1.1 billion euros ($1.2 billion) to shareholders as part of their planned merger to create the world fourth-biggest auto manufacturer.

The deal was negotiated before the coronavirus pandemic halted car production and triggered a worldwide slump in demand, almost halving the companies’ share prices.

As PSA Chief Financial Officer Philippe de Rovira detailed the severity of the damage inflicted by the health crisis on PSA and the broader European car industry, he said there has been no final decision on the payout. The company has postponed its annual general meeting to June 25 from May 14, delaying any confirmation.

The planned move “remains an open question” and any change would have to be agreed by both PSA and FCA as specified in the merger deal, De Rovira said during a call with analysts on Tuesday.

PSA has not made any comment on the financial terms of the agreement, he added.

A spokesperson for Fiat declined to comment.

PSA, which builds Peugeot, Citroen, Vauxhall and Opel vehicles, is one of the most vulnerable to a downturn in Europe, where the virus outbreak has paralyzed public life.

Car sales in the region fell 52 percent in March, the most on record, as showrooms closed and production came to a halt. PSA has forecast the European market could contract by a quarter this year and around 80 percent in April.

One factor weighing on European companies as they consider shareholder rewards are warnings from countries including France and Germany that aid packages such as state-backed loans or bailouts won’t be extended to those paying dividends.

PSA hopes to avoid tapping French government loans, which could complicate the merger with FCA. 

“We have not taken any loan guaranteed by any state,” De Rovira said. “We want the company to be as free as possible of public dependence.”

PSA posted a 16 percent slump in first-quarter sales. The company has slashed costs, shed its temporary workers and put about 90 percent of full-time employees on government-paid furlough schemes in a bid to shore up liquidity.

De Rovira said any decision to restart factories in Europe would have to be accompanied by a reopening of dealerships to avoid a build up in inventories.

Skoda’s China revival plan outlined by top VW Group exec

Volkswagen Group is working on a plan to revive Skoda’s flagging sales in China, where it was the company’s only brand to register a volume decline last year.

China has been Skoda’s largest single market since 2010 but the brand has faced increasing competition from domestic automakers. Last year Skoda’s China deliveries fell 17 percent to 282,000 even while the country remained the Czech brand’s biggest market. Skoda’s global volume fell 1 percent to 1.2 million units.

VW Group China Chief Operating Officer Stephan Woellenstein said Skoda’s turnaround plan will follow the template the group used to turn around the core VW brand’s fortunes in the market.

“In 2016, we drafted a program to revitalize the VW brand consisting of various strategic elements that we internally called Move Forward, which has proved to be very successful,” Woellenstein told reporters on a conference call. “For the past several months we have been working on something similar with Skoda.”

Without being more specific, Woellenstein said he recently finished talks with SAIC, one of the company’s two Chinese partners, on additional measures to help Skoda “in the near future.” VW Group also has a Chinese joint venture with FAW that builds cars for the Audi and VW brands.
 
Major pillars of the program that revived the VW brand included an SUV product offensive that included crossovers for its JV with FAW for the first time, the addition of battery-electric vehicles such as the e-Bora and e-Lavida and a mass rollout of fully connected models to appeal to Internet-savvy buyers in China. 

Overall, VW Group managed to outperform the domestic market with a 0.6 percent increase in sales in China in 2019, notching a new record with 4.23 million deliveries.

Skoda‘s overall business, meanwhile, remains highly profitable globally and its 8.4 percent margin last year was better than that of VW Group premium brand Audi. 

VW Group CEO Herbert Diess, who is also Skoda’s chairman, first publicly expressed his displeasure with the Czech brand’s problems in China more than a year ago.

Skoda’s troubles in China come at a difficult time for the entire market. Growth gave way to contraction since the 2016 election of Donald Trump, who launched a trade war with Beijing soon after becoming U.S. president.

China’s sales peaked at more than 24 million passenger cars in 2017, Trump’s first year in office, before declining the following year for the first time since 1990 as consumers postponed purchasing big ticket items due to the tensions. What was initially expected to be a one-off decline for car sales, however, has continued and even accelerated because of the Coronavirus pandemic.

“This year China will struggle to crack the 20 million sales mark,” Woellenstein said, adding that in the month of February only 89 cars were sold across all of Hubei Province, which is home to Wuhan, the original epicenter of the COVID-19 outbreak. “From this point it could certainly take another three to four years to claw back the 4 million cars, coming from 20 or even 19 million. This is not something that can be done in 12 or 24 months.”

Woellenstein said the trade conflict led to a “real renaissance” for established strong brands such as VW as well as a few Japanese automakers at the expense of Western marques that struggled to gain a foothold in China over the last decade.

“They have gotten caught in the middle, failing to make inroads with customers of stronger international brands while being sandwiched in by successful upstart Chinese brands such as Geely on the other side. Renault is one prominent example,” Woellenstein said. “The steady erosion of their business led them ultimately to conclude the costs of operating here outweigh the benefits,” he said. “At present, we are still confident we can bring Skoda back to a growth path like VW and Audi.”

Renault Group said last week it would stop selling its own-branded passenger cars in China and focus instead on light commercial vehicles and EVs in the market, effectively exiting the market after persuading only roughly 300,000 Chinese customers to buy its cars since 2016.

VW Group’s Seat brand said on March 25 that it has postponed its plans to re-enter China.