Coronavirusly COVID-19 Automotive News: BYD, Mercedes Benz, Predictions & Transformations

In coronavirus COVID-19 news are BYD, Mercedes-Benz, AlixPartners and Cox Automotive.

BYD LA Gets back to Work Safely

BYD (Build Your Dreams), a leading manufacturer of zero-emission vehicles and a major employer in Los Angeles County, announced it has implemented stringent safety protocols and begun a phased reopening of its Lancaster Coach and Bus manufacturing plant.
BYD (Build Your Dreams), a leading manufacturer of zero-emission vehicles and a major employer in Los Angeles County, announced it has implemented stringent safety protocols and begun a phased reopening of its Lancaster Coach and Bus manufacturing plant.

As it reopens, BYD will continue to follow guidelines for safe operations set by California, Los Angeles County, and the City of Lancaster while ramping up production of all-electric transit buses and motor coaches that meet stringent Buy America standards.

“The health and safety of our employees and our community is our top priority,” said Stella Li, BYD North America President. “The systems we have implemented here will serve to protect our workers and the citizens of our entire community.”

As it reopens, BYD is focused on the safety of its workforce, many of whom are members of the Sheet Metal, Air, Rail and Transportation (SMART) Union, Local 105. The company’s Human Resources team has adopted an innovative multi-point safety protocol, which includes:

Social Distancing, including markings at all crowd gathering places to facilities social distancing.
Screening and Monitoring, including non-contact body temperature scanning before anyone can enter the plant.
Disinfection and Sanitation, including regular sanitation of all common areas and touch-prone areas and promoting the use of sanitizers.
Prevention and Awareness, including providing and requiring the use of Personal Protection Equipment such as masks and gloves for all employees, and promoting safety awareness through training, posters, and memos.
Promoting safety practices at home for workers, such as Sanitizing personal vehicles, avoiding gatherings, and frequent and vigorous hand washing.

BYD has divided its production workforce into shifts, has limited capacity in break areas, and has social distancing markings in gathering spots, including at entry points into the factory.

Following state, county, and City of Lancaster safety guidelines, BYD limited operations at the manufacturing plant in mid-March. Only employees deemed essential, such as those providing service and care to transit agency customers, worked during this period.

Although its manufacturing operation was paused, BYD continued to serve Lancaster, Los Angeles County, and its customers through the donations of Personal Protection Equipment to fight the spread of COVID-19. BYD has donated over $1 million worth of PPE items including masks and sanitizers.

MBZ Gets Back into Production

After a production suspension period caused by the COVID-19 pandemic, Mercedes-Benz car plants have successfully restarted production step by step. From June onwards, all Mercedes-Benz AG plants worldwide will be restarted. On April 20^th, the engine and component plants in Germany gradually resumed production first, followed by the Mercedes-Benz car assembly plants. The international Mercedes-Benz production sites have also incrementally resumed production in parallel. The health and safety of everyone involved is of the highest priority for Mercedes-Benz. The production ramp-up is designed to be flexible in order to be able to react to current developments and country-specific regulations. In resuming production in a coordinated manner, Mercedes-Benz is continuing its product and electric offensive and thereby also serving its largest sales market in China, where the company is seeing a significant increase in demand again.

Jörg Burzer, Member of the Board of Management of Mercedes-Benz AG, Production and Supply Chain Management: “Together with the whole team, I am glad that we are gradually restarting our production in a coordinated manner. Flexibility is what counts here: our plants’ flexibility is one of our strategic focuses in production and that has helped us in this ramp-up. Our first priority is to further contain the spread of the COVID-19 pandemic and to provide a safe working environment for our employees, suppliers and service providers. We are producing in compliance with extensive safety measures and we will be increasing our production step by step.”

Mercedes-Benz powertrain plants in Germany

The Mercedes-Benz Untertürkheim plant restarted production on April 20 after a suspension period. The Stuttgart plant produces engines and components that are required for production at Mercedes-Benz assembly plants worldwide – the same applies to the Kölleda and Arnstadt plants (MDC Power and MDC Technology). Similarly, the Mercedes-Benz Berlin plant has resumed its production, e.g. of Camtronic engine management units. The same applies to the Mercedes-Benz Hamburg plant that produces axles and axle components for Mercedes-Benz vehicle production around the world. As part of Mercedes-Benz’s electric offensive, the Kamenz battery plants of Mercedes-Benz subsidiary Accumotive — which produce batteries for the EQ family, as well as drive batteries for plug-in hybrid vehicles and 48V batteries – continued their operations during the production suspension, working on strategic ramp-up projects on a 2-shift basis with strictly staggered shifts and extensive safety measures for the employees.

Mercedes-Benz car assembly plants Germany

The gradual restart of the Mercedes-Benz car assembly plants began on April 27. At the Mercedes-Benz Bremen plant, production capacities are gradually being increased for the entire product range, which includes the bestselling SUV, the Mercedes-Benz GLC. At the same time, production of the EQC (combined electrical consumption: 20.8–19.7 kWh/100 km; combined CO2 emissions: 0 g/km)[1] is being gradually ramped up on the same line as part of the electric offensive. The Mercedes-Benz Sindelfingen plant production includes the Mercedes-Benz E-Class and the S-Class Saloon, the world’s bestselling luxury saloon in 2019, for which China was the largest market last year. The E-Class and S-Class electrified models, hybrid and plug-in hybrid variants, are also produced at the Mercedes-Benz plant in Sindelfingen. This year Mercedes-Benz will start producing the new S-Class in the new “Factory 56” in Sindelfingen, which will open in September 2020. The Mercedes-Benz Rastatt plant is the lead plant for the worldwide production of the high-volume Mercedes-Benz compact cars: in 2019, one in four Mercedes-Benz vehicles sold worldwide was a compact car. The A-Class Sedan, A-Class and B-Class as well as the compact SUV GLA are manufactured in Rastatt. Since this year, the plug-in hybrid variants of the A- and B-Class are also being produced here.

Mercedes-Benz global production network

Mercedes-Benz Cars Operations (MO) is responsible for passenger car production at over 30 locations around the world as part of a flexible and efficient production network. After a country-specific period of work suspension, all Mercedes-Benz AG car plants worldwide will be restarting from June. Production in China has been gradually resumed since February 10, 2020. In parallel to the restart of the German Mercedes-Benz production locations, all other international locations have resumed operations since the middle of April. These include the plants in Sebes / Cugir (Romania) that manufacture transmissions for Mercedes-Benz vehicles and the Mercedes-Benz passenger car assembly plants in Kecskemét (Hungary), an important part of the global compact car production network, in Tuscaloosa (USA), the longstanding location for SUV production, and in East London (South Africa), a part of the global production network for the C-Class, which have all restarted production. The Hambach (France) plant, which produces the electric smart EQ models, has also been gradually ramping up operations since June 2nd.

To protect its employees, the company has taken precautions to prevent infection and has agreed on a comprehensive set of measures with the General Works Council, which were introduced in the plants. These include hygiene and cleaning standards, as well as regulations for maintaining a distance of at least 1.5 metres and for the use of masks covering mouth and nose in production.

Because of the COVID-19 pandemic, Daimler decided to suspend most of its production as well as work in selected administrative areas in Europe for an initial two-week period (March 23 to April 5, 2020). This was followed by short-time work in Germany starting April 6. The situation within the company remains varied. Short-time work is being continued in certain areas. The short-time work affects the Group’s car, van and commercial vehicle plants in Germany. Necessary basic functions as well as future planning and strategic projects were excluded from short-time work so that work can quickly resume after the crisis. Country-specific arrangements apply for the international locations. In this respect the company is following the recommendations of international, national and local authorities. Daimler’s management is monitoring the situation constantly and will take further measures as required.

Power consumption and range have been determined on the basis of Regulation (EC) No. 692/2008. Power consumption and range depend on the vehicle configuration.

Covid-19 Causes Challenges for Automotive Industry

Coming in the midst of both already-softening automotive markets globally and a once-in-a-lifetime transformation away from traditional vehicles and systems, the effects of the Covid-19 crisis are presenting the entire auto industry with severe revenue and cost challenges, along with some very tough capital-allocation choices. In particular, due to lockdowns, slow restarts and lingering blows to consumer confidence and employment, the industry faces a cumulative volume drop of up to 36 million vehicles this year through 2022 (compared with sales in 2019), as well as a burden of $72 billion in new debt added since early March of this year. That’s according to new research from AlixPartners, the global consulting firm, entitled The AlixPartners Global Automotive Outlook: Mastering Uncertainty.

The AlixPartners analysis also forecasts automaker sales globally to be 70.5 million vehicles this year, with sales in the United States being 13.6 million units.

Meanwhile, on the supplier side of the industry, the analysis shows that in 2019, before this crisis, suppliers representing only 6 percent of that sector’s revenues were financially “strong,” according to a proprietary AlixPartners formula and database that includes such measures as debt-to-equity ratios, working capital and return on capital employed (ROCE), while companies representing 50 percent of revenues were either “stressed” (those representing 43 percent of revenues) or “distressed” (those representing 7 percent).

“With this sharp drop creating gaping holes in their profit-and-loss statements and ballooning balance sheets, players in this industry should rapidly reduce their true breakeven points,” said Mark Wakefield, global co-leader of the Automotive and Industrial Practice at AlixPartners and a managing director at the firm. “To be prudent given the uncertainty of the pandemic, companies should get their breakeven points to Great-Recession levels—to be in line with global industry sales of only about 65 million units, or at most about 14 million units on the U.S. side.”

Meanwhile, other parts of the AlixPartners research find further evidence that suppliers and automakers alike indeed entered this crisis in worse financial shape than during the Great Recession. For instance, according to the research, ROCE—an important measure of profit and capital efficiency—had declined 47 percent on average for automakers globally last year versus 2015 and 36 percent for suppliers. In addition, it also finds that from 2015 through the first quarter of this year, debt loads for suppliers increased 33 percent while for automakers total debt was up 36 percent in the same period. And all that was before, notes the study, Covid-19 added the incremental $72.1 billion in new debt—$19.7 billion in new term-debt and $52.4 billion in drawn-down revolving credit—to the books of automakers and 50 suppliers globally, beginning in early March through May 22^nd.

“The impact of the Covid-19 crisis globally is as if a market the size of all of Europe had vanished for the year,” said Stefano Aversa, chairman of Europe, the Middle East and Africa (EMEA) at AlixPartners and a decades-long auto-industry expert. “Clearly, automakers, suppliers, mobility players and all others connected to this industry need to be microscopically selective with their capital-allocation decisions—closely and unsentimentally examining each and every program and spend for its cash and profitability implications. To weather the storm, companies need to be courageous, yet forward-looking in their decisions, all the while taking full advantage of any favorable governmental policies available to them.”

The AlixPartners global sales forecast for this year includes what the firm calls a “mixed-speed recovery,” with China (where lockdowns and restarts took place first) recovering the fastest, to 23 million units; followed by the U.S., at 13.6 million; and Europe (parts of which were regarded to be hit the hardest by Covid-19), at just 14.1 million. Overall, AlixPartners doesn’t see global sales returning to their recent-peak levels (2017 levels) until after 2025.

Among the other findings in the AlixPartners research:

• Prior to the Covid-19 crisis, industry investments in autonomous vehicles were scheduled to be $79 billion cumulatively from 2020 through 2025, but the crisis—on top of other setbacks—means that that spending rate will likely be pared back substantially.
• Around 40 percent ($13 billion) of disclosed automotive-related mergers-and-acquisitions activity last year was in what AlixPartners calls the “CASE” (connected, autonomous, shared-mobility, electric/electrified) domain, while CASE-related partnerships increased 32 percent (to 560), up from 423 in 2018.
• A “moment of truth” is arriving for the European auto industry and European regulators, in that AlixPartners finds a 21 percent gap exists between current European Union automotive targets for carbon-dioxide emissions and the industry’s anticipated performance through year-end 2020—issues that might well require a political solution, or else companies will face fines of 1

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