Mohamed El-Erian: Markets are pricing in a global recession
London (CNN Business)Fiat Chrysler and its luxury brand Maserati are closing most of their manufacturing plants in Europe as the coronavirus outbreak rampages across the continent.
The Italian-American autos group said in a statement Monday that it would suspend operations at a majority of its factories in Europe through March 27 in response to an “interruption in market demand.” The company said that six facilities in Italy would be closed, as well as plants in Serbia and Poland.
Fiat Chrysler (FCAU) said that it “is working with its supply base and business partners to be ready to enable our manufacturing operations to deliver previously planned total levels of production despite the suspension when market demand returns.”
Italy has been put under a dramatic lockdown as the coronavirus spreads in the country, where there are now more than 24,000 cases — the most outside China. Italy on Sunday announced 368 deaths over the previous 24 hours, bringing its death toll to 1,809.
Shares in Fiat Chrysler were down nearly 16% in Milan following the announcement. The stock has lost 47% of its value so far this year.
On Sunday, Italian super-car maker Ferrari (RACE) said it was temporarily closing two manufacturing facilities in Italy because it was struggling to get the parts it needed to continue production.
Economists say that measures imposed to limit the spread of coronavirus in Italy are likely to push the country’s already fragile economy into deep recession that will put hotels, travel companies, restaurants and other businesses under intense pressure. Germany and France are adopting similar measures and a wider European recession looks unavoidable.
The closure of car plants in Europe illustrates how the impact on the auto industry from coronavirus is going global. The pandemic has already resulted in extended factory closures and a steep drop in vehicle sales in China.
Fiat Chrysler has a significant manufacturing presence in the United States, as well as facilities in other places including the United States, Latin America and China.
More trouble ahead
European car companies could be in for more trouble.
The continent’s automotive industry is highly integrated, with supply chains that cross multiple countries. Germany is home to Volkswagen (VLKAF), the world’s largest carmaker, as well as BMW (BMWYY) and Daimler (DDAIF).
Renault (RNLSY) and Peugeot (PUGOY), which is merging with Fiat Chrysler, are based in France. The United Kingdom is a major manufacturing facility for Japan’s Nissan (NSANF), and home to Jaguar Land Rover.
— Hanna Ziady contributed reporting.
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