The North American auto industry slammed on the brakes in March because of the novel coronavirus (COVID-19). The sector already had been forecast to slow down in 2020, with lower light-vehicle demand. That turned into a sudden stop as the coronavirus spread.
Like other industries, the auto sector had to rethink, and fast, how it could resume production. The stakes were enormous. Major automakers such as General Motors Co., Detroit, and Ford Motor Co., Dearborn, Mich., tapped credit lines to ensure they had enough capital to get through the shutdown and a restart of production. Consulting firm AlixPartners estimated in June that automakers and major suppliers had added $72 billion in debt since March.
“The industry can only survive if they can start producing,” said Arun Kumar, a managing director in the automotive and industrial practice at AlixPartners.
The question was how to resume production safely.
“It’s very challenging, especially in an assembly plant, where you have 1,500 to 2,000 people who are going to touch the same product,” said Kristin Dziczek, vice president of research at the Center for Automotive Research (CAR), Ann Arbor, Mich. “Everybody is touching this product. It’s a unique situation they’re in.” Auto part suppliers faced similar issues, she said. “A lot of thought and effort had to go into the restart. Their [profit] margins are already very slim.”
The coronavirus is highly contagious. It can spread quickly, especially in crowded, indoor spaces. Some industries, such as meat packing, have been especially hard hit by COVID-19. Meanwhile, COVID-19 is a global phenomenon and automakers and suppliers drew upon the experience of their operations worldwide, which were also dealing with the pandemic.
“We started to shut down in China first,” said Patrick Randrianarison, vice president manufacturing strategy and operation for the vehicle group of Eaton Corp., Dublin, Ireland, and Beachwood, Ohio. “COVID is pushing us to think differently.” The company had “meetings with all plant managers to exchange ideas.” In the early days of the coronavirus outbreak, there would be virtual meetings twice a day. “Now we have it twice per week. We continue to have that alignment meeting all across the world. This is how we learn.”
Automakers and suppliers began to adopt various steps, including:
“We designed or modified more than 5,100 workstations,” said Jodi Tinson, a spokeswoman for FCA US, Auburn Hills, Mich. “Most of those actions involved the installation of plexiglass barriers and weld curtains to provide separation between employees. In some cases, we have changed the tasks assigned to an employee to enhance social distancing. It’s not practical to actually move workstations without a complete redesign of the process.”
She noted that jobs in some stations were repositioned or reassigned to allow for greater spacing between operators. “We are relying on the mandatory use of personal protection equipment—including mandatory safety glasses and FCA-provided masks—as well as health screening questionnaires and temperature checks,” Tinson said.
Ford has a similar setup. “A daily online health self-certification must be completed before work,” said Kelli Felker, a spokeswoman for the automaker. “If employees indicate they have COVID-19 symptoms, may have been exposed or are waiting the result of a COVID test, they will be told not to come to work.”
When workers arrive at a plant, they are given a “no-touch temperature scan,” Felker said. “Anyone with a raised temperature will be told not to come to work.” Everyone entering a Ford operation is required to wear a face mask. American Honda Motor Co., Torrance, Calif., which has factories in the U.S. and Canada, established much the same practices. The company’s North American operations also had mandatory temperature scanning and cloth face coverings.
“Honda resumed operations in the U.S. and Canada on May 11, starting production very gradually with a focus on the health and safety of our associates,” said Chris Abbruzzese, a spokesman for Honda North America. “We spent time up front to ensure our associates are familiar with the use of Personal Protective Equipment (PPE) and other new procedures related to manufacturing processes,” he said. “Additionally, we wanted to hear feedback from Honda associates on the changes that have been implemented.”
General Motors created an online guide for employees. It included instructions for entering plants, how there would be increased cleaning and how employees would be asked to clean their workstations and how to practice staying six feet apart. Mary Barra, CEO of GM, said at an Automotive Press Association webinar on June 15 that she had visited eight factories while additional executives went to other operations. “Our goal as we get people back to work is to make sure they returned and they had confidence,” Barra said, according to a transcript of the event. “The feedback I’ve been getting very consistently is that people feel there was a lot done. They understand the safety protocols. They understand all the changes we made in our facilities and they do have confidence. ... We invested time in training.”
Production workers at GM, Ford and FCA are represented by the Detroit-based United Auto Workers union. Local union plant officials also have been involved with COVID-19 safety efforts.
Companies are employing all the nifty digital tools they can, including augmented reality, autonomous robots and digital simulation, as part of their COVID-19 response.
Eaton’s Vehicle Group has used Microsoft HoloLens 2 augmented reality (AR) goggles. These devices display 3D images in physical spaces to ensure ongoing work can be performed while keeping workers safe. AR also assists with ongoing training. The group identified an opportunity to train operators and engineers on new equipment, which would have traditionally been done by instructors traveling to remote sites.
Eaton also said it is connecting plant systems and machines to collect and analyze real-time information to optimize plant floor management. The vehicle group is using autonomous guided vehicles (AGVs) or autonomous mobile robots (AMRs) to eliminate the need for forklifts and other human-operated transport machinery. Digital simulation applications are being used to test how to achieve the highest production. The information is used to design new manufacturing cells or redesign existing ones.
“Most of our workstations are very automated,” said Eaton’s Randrianarison. “It was about reducing the number of operators. Sometimes we had two instead of three, or one instead of two.” Eaton had shut down production for as long as 10 weeks, depending on location. “We had lower output because we had to rearrange the cells in our facilities,” he said. The executive cited how AR has enabled safety checks without travel. “COVID is pushing us to think differently. With the augmented reality, we can do almost everything [virtually].” Eaton also has virtual meetings with representatives of plants “all across the world. This is how we learn.”
Parsable Inc., San Francisco, provides digital tools to industrial clients such as American Axle & Manufacturing Inc., Detroit. Employees access and enter information on smartphones. Parsable says its technology is being adapted to boost safety amid COVID-19. “We can digitally capture that data,” said Lawrence Whittle, Parsable’s CEO. “We can confirm recent history,” and determine if employees “had contact with people. ... American Axle is asking us for worker safety, to make sure they have data, and identify which workers were in which plant. They’re using us in efficiency and quality.”
The use of such technology already was increasing. “Because of the impact of COVID, people realize we have to accelerate,” Whittle said.
While automakers and suppliers are taking more precautions, there have been reported COVID-19 cases since output restarted. Ford, for example, paused production in May at plants near Kansas City, Mo., and in Chicago to conduct deep cleaning and disinfecting of the employee work area. People known to have been in contact with infected individuals were asked to self-quarantine for 14 days.
“The production pauses were due to specific cleaning protocols and were very short,” Ford’s Felker said. “Our cleaning protocols have changed—as have many of our safety protocols around COVID—as we have learned more about the virus. Our U.S. plants [have been] running on our normal operating pattern since June 22, which was weeks ahead of schedule. We were able to pull it ahead because our workforce and suppliers were able to support [us].”
Overall, the industry has received a passing grade for its early restart efforts. “The industry as a whole has done a reasonable job,” said AlixPartners’ Kumar. “The entire industry was starting from a standstill to get up and running. ... The COVID cases are something you are going to have to monitor.”
The question is whether the industry can maintain its momentum. There is no vaccine for COVID-19 and treatment still is evolving. What’s more, automakers and suppliers are operating amid decreased demand for the vehicles they produce. “We need healthy workers, healthy suppliers and healthy demand,” said CAR’s Dziczek. “If any one of those goes down” the industry faces major problems.
So far, she added, “Healthy demand has held up stronger than anybody thought. We may not be out of the woods yet. ... We’re not going to have strong auto sales in a contracting economy.” The U.S. entered a recession early this year and shutdowns related to COVID-19 have made that worse. An economic recovery may be slow.
“It’s going to be tough to come back to the normal level of sales,” said AlixPartners’ Kumar. In June, AlixPartners forecast U.S. vehicle sales of 13.6 million vehicles this year, down from more than 17 million annually for the past few years, and 70.5 million globally. The consulting firm said it doesn’t expect global industries matching recent peaks until after 2025. As a result, automakers and suppliers will struggle to make profits while the industry also is investing in more electric vehicles.
“The industry has truly entered this profit desert,” Mark Wakefield, global co-leader of AlixPartners’ automotive and industrial practice, said during a June presentation. “There is a lot of uncertainty. That means being very selective on how you do investments so there’s a very clear path to profit.” With the industry’s added debt, he added, “We don’t see an ability to pay it down very fast.”
“We don’t know how long this is going to last,” Dziczek said. “It’s going to hamper advanced R&D and make it more difficult to do. Product cadence is going to slow. [Model] refreshes are going to get pushed off.” Referring to an economic recovery, she added: “Tell me when that’s going to happen. Then [automakers] can go back to deleveraging and investing in future tech and future products.”
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