World News

UK carmakers seek alternatives to China suppliers to cushion coronavirus hit

By Costas Pitas

WOKING, England (Reuters) – Bentley and McLaren have sought alternatives to their Chinese suppliers to mitigate the impact of the coronavirus outbreak, which has halted production at some carmakers’ manufacturing sites around the world.

The virus has infected tens of thousands and killed about 3,000 people, the majority in China, confining millions to their homes, disrupting businesses and delaying the reopening of factories after the extended Lunar New Year holiday break.

Both Bentley and McLaren said their car production, all of which is in Britain, had not been affected so far. Bentley, owned by Volkswagen <VOWG_p.DE>, said it had secured the supply of the 21 basic components that it sources from China until the end of the month, such as silicon chips.

“We’ve re-sourced them,” Chief Executive Adrian Hallmark told Reuters, as the firm showcased its new Mulliner Bacalar car, but did not say where the alternative supplies came from.

“We don’t see a break in production yet.”

McLaren Automotive boss Mike Flewitt said his company was seeking to take similar steps.

“We are developing some alternating sourcing opportunities where we can but we don’t have multiple sources for a company this size,” he said as the firm unveiled its 765LT model at an event at its Woking headquarters in southern England.

Flewitt said McLaren had also taken steps to mitigate the risk from suppliers in northern Italy, which has suffered Europe’s worst coronavirus outbreak.

“We have restricted travel out to those suppliers and we’ve have to make alternative logistics arrangements so that we can get material out,” he told Reuters.

Some carmakers have seen their production hit by the outbreak of the new coronavirus.

Last month, Fiat Chrysler said it was temporarily halting production at its Serbian plant, the first such suspension by an automaker in Europe in response to the outbreak in China, which had already forced closures in Asia.

China accounted for about 6% of McLaren’s sales last year, which stood at around 4,700 vehicles; and for 18% at Bentley, which sold just over 11,000 vehicles.

Flewitt said there had been “very few sales at all” so far this year in China for McLaren.

For Bentley, the sales rate in China is half what the carmaker would expect and it risks losing some of the 200 to 250 sales from the first three months of the year, Hallmark said.

“If we see sustained improvement by the end of the quarter, then we think we can cover that back by the end of the year,” he added. “If it carries on, I won’t predict numbers.”

In January, Volkswagen boss Herbert Diess criticized Bentley, which is seeking to engineer a turnaround of its business, by saying the unit’s performance would be “more impressive if we had a margin higher than zero.”

Hallmark said the company, based in Crewe in northern England, had faced several problems in 2018, returned to profitability last year and is “clearly a strategic part of the group’s brand portfolio”, with improvements being made.

“What we need to do … is increase the value that we offer to customers, increase the margin that we generate,” he said.

(Reporting by Costas Pitas; editing by Stephen Addison and Pravin Char)