Layoffs, cutting costs and halting dividends… companies are scrambling to adapt as the coronavirus emergency hits demand while the draconian measures taken to contain the illness undercut production.
With the economic impact of COVID-19 threatening the survival of many firms, governments have pledged hundreds of billions to help them limp along — or failing that, to bankroll outright rescues or nationalisation if necessary.cor
Here are some measures companies have taken:
Suspending production
Several industrial giants, in particular in the automobile industry, have reduced or even suspended production.
America’s “Big Three” carmakers — General Motors, Fiat Chrysler and Ford — are temporarily halting operations throughout North America through the end of the month, the companies said in conjunction with the auto workers union. Most European carmakers, including Daimler, VW, BMW, Renault, Peugeot Citroen and Fiat Chrysler have shut down most if not all of their manufacturing lines.
Nissan and Ford have also shut facilities in Europe. Scania, part of Volkswagen’s Traton group, is halting most European truck production following disruptions in the supply chain. Tyre giant Michelin is halting production in Spain, France and Italy for at least a week.
Airbus said it was suspending work at its French and Spanish plants for four days to improve workplace safety. High-end fashion giant Gucci, part of the Kering Group, is closing all sites until March 20, while Hermes is shutting its manufacturing sites until the end of March.
Forced leave, layoffs
A slew of American retailers have shut some or all of their outlets, including Nike, Macy’s and Gap.
The iconic Saks Fifth Avenue flagship store in New York is closed, and Apple has shuttered all its stores outside China. Adidas has shut its stores in Europe and North America. The situation is especially catastrophic for the travel industry, with US hotel giant Marriott shutting down some of its properties and furloughing tens of thousands of workers.
Airlines have been hit by a double-whammy: plunging demand and sweeping travel restrictions imposed by governments. They have taken different measures to adapt. Russia’s Aeroflot has asked employees who have accumulated extra time off to use it.
Air France says it will look at reducing working hours, which several countries have facilitated with easier access to state benefits for workers now forced to go part-time.
Low-cost airline Ryanair, which has announced “most if not all” of its flights from March 24 will be cancelled, said it is looking at a similar move, along with voluntary departures and temporarily suspending work contracts. Forcing workers into unemployment temporarily is also an option several countries have made easier, with Volkswagen’s Spanish subsidiary Seat also taking that course.
Italian shipyard Fincantieri, which has also halted output, has asked its workers to use their annual leave. UK mobile phone retailer Dixons Carphone, however, is axing 2,900 jobs as it faces “turbulent times”.
Cost-cutting
Firms have also moved swiftly to cut costs. Air France-KLM, which is slashing as many as 90 percent of flights, will reduce its planned investments for 2020 by 350 million euros ($380 million) and make 200 million euros in savings elsewhere as it seeks to ensure it has enough cash on hand. FedEx said it was parking its older planes as demand for shipping mail and packages by airdrops and because newer planes are more fuel-efficient.
Firms are not sparing shareholders from the pain either. Lufthansa said it would not distribute a dividend from 2019 earnings. Inditex, which owns clothing brand Zara among others, has also put off a decision on dividends from the 3.6 billion euros it earned in its 2019-2020 fiscal year while making a provision of 287 million euros for the crisis.
State support
Companies are not hesitating to take up offers of state support. German tourism giant TUI, which employs 70,000 people worldwide and has suspended the “majority” of its operations, has made a request for state help.
Germany’s government has promised “unlimited” loans to stricken firms via state bank KfW. The airline industry association said Thursday they will need up to $200 billion to rescue them from collapse.
Meanwhile, US planemaker Boeing is seeking at least $60 billion in federal support for the aerospace industry. The Italian government said it intends to renationalise the bankrupt former national carrier Alitalia under an emergency economic rescue plan.
Air New Zealand has been offered a NZ$900 million (US$515 million) loan to help the flag carrier survive the crisis, the government said Friday. France stands ready to nationalise large companies “if necessary”, according to Finance Minister Bruno Le Maire.
