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Toyota Extends Factory Closures on Growing Coronavirus Scare

The coronavirus continues to spread around the world, leading to greater impacts every day. Confirmed cases of COVID-19 have exceeded 1.5 million on a worldwide basis, with the death toll crossing 85,000. The auto sector is under major pressure due to factory shutdown, lower footfall at dealerships and supply chain disruptions. Amid the virus-led uncertainty, many auto firms have withdrawn their annual guidance and are resorting to strategic cost-cut measures in a bid to preserve financial flexibility. Dividend cuts, buyback suspension, employee layoff and hiring freezes are becoming commonplace. With the pandemic showing little signs of abatement, companies are left with no choice but to keep factories shut for extended durations.

One of the latest auto biggies joining the slew of prolonged closures is Toyota Motor TM. The Japan-based auto giant has pushed back the restart of plants in North America — including Canada, Mexico and the United States — by an additional two weeks. The pandemic-induced factory closures, which began in March, were initially expected to last till Apr 20. However, the virus mayhem has dented vehicle demand as consumer sentiment is weakening and spending on big ticket items is beginning to stall. Also, growing coronavirus fears have prompted Toyota to increase social distancing and protect the health of employees. The latest plan allows employees to return to work on May 4. Toyota currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Most U.S. automakers had halted production in mid-March following the coronavirus outbreak. However, the companies extended the suspension till April-end, in view of the massive spread of the pandemic. Just a couple of days back, automakers Fiat Chrysler FCAU and Honda Motor HMC announced that they are expecting to restart production in the United States and Canada in May. The car companies had initially expected to resume manufacturing in April but now that the pandemic has taken an ugly shape in the United States, production seems unlikely to start before May. The suspension of production till April-end comes after President Donald Trump last week extended the guidelines aimed at containing the spread of coronavirus till Apr 30.

As COVID-19 has stifled vehicle demand and dimmed earnings prospects, automakers are now slashing salaries and in some cases furloughing employees without pay. Tesla TSLA is furloughing all non-essential employees and even implementing pay cuts through the end of the second quarter. Each of the Big 3 Detroit carmakers has announced salary cuts for white collar workers and senior executives. Honda and Nissan also announced recently that they would temporarily stop paying furloughed workers at the U.S. plants. The automobile industry is facing a challenging time amid coronavirus jitters. Notably, J.D. Power forecasts U.S. vehicle demand to decline 80% year over year in April.

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Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
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