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Impacts to Automotive
supply chains from
COVID-19
Purchasing Staff: Le Thi Thuy Ngan
The outbreak of COVID-19 is the most significant
event to impact the US economy & automobile market
Covid-
19
Sales
decline
Work
forces
Falling
markets
Supply
chain
disruptions
COVID-19: The caused for suspended
manufacturing
 Ford, GM and FCA have suspended manufacturing in parts of the US
 Nissan has suspended production in the UK
 Daimler has suspended European
 Toyota has halted production in Europe
 BMW has stated that the closure of its European plants and its factory in South
Africa
 Honda has closed four US vehicle plants
 Toyota Europe is shuttering plans across the continent in the wake of government
coronavirus-related shutdowns
 Renault is closing plants in Slovenia, Morocco, and Romania
 Volkswagen is suspending production as a result of the outbreak
“
”
New car sales approximately 17,000,000
units within US for the last 5 years
Analysts had predicted the pre-pandemic
reduction in sales of 7-10%”
Survival and Loss Mitigation
Risk
Management
Plans
(1) Diversifying supply chains from a geographic
perspective to limit risks from any one country or region
where possible
(2) Securing multi-sourced key commodities to reduce
reliance on individual suppliers
(3) Implementing inventory systems to mitigate against
supply chain disruption
Protect Cash
Flow
(i) Focus on collecting aged receivables
(ii) Extending payables to conserve cash
(iii) Government funds
Attention to
Supply
Network
(1) Enhance communications and discussions betwwen tiers
suppliers
(2) Proactively alter supply chain plans to keep plants
running at maximum efficiency
(3) Pay attention to the status of inventory at the supplier
location, supplier production schedules, and status of
supplier shipments
(4) Implement programs to access data and enhance
management and decision making capabilities
Implementation
Alternative Supply Sources
“Alternative sourcing markets will vary
greatly by supply chain and manufacturing
expertise
Countries such as: Mexico, Brazil, India, and
Chile is most likely markets in which to
diversify beyond China, yet the rate at
which the virus appears to be spreading
may have diminished these alternatives”
Action quickly once plant shut-downs
and travel restrictions have eased
New Financial Projections
Assumptions
Forecasts
Business
plans
It is important to prepare current projections that consider the best and worst case
If there is a worst-case, the sooner steps are taken to start the restructuring process,
the more options your business will have.
Develop A New Financial and Operating Plan
Protecting working capital
•“Cash is king”
• Developing and implementing a cost reduction plan
Legal and business review of existing credit facility documents
• Review loan and bond indenture documents
• Proactive develop a strategy to discuss standstill and waiver agreements with the lender
• Review the inter-creditor agreements and include all tiers of lenders in discussions
Identify any collateral that could secure additional financing
• Identify available assets to secure additional financing: real property, inventory and account
receivables
• Securing new guaranties from principals or other entities in the corporate enterprise
Working with a professional legal and financial advisor team to open lender
communications
• Involving professionals in the process provides significant credibility information as reference to making
dicision
“
”
What if maintaining existing
financing is not viable?
Establish strategies: employees, lenders, trade creditors and suppliers, customers and investors
Once the board approves a strategic plan, initiating discussions with lenders and
other stakeholders will require financial disclosure including projections.
Lenders will need to verify financial and operating information in order to consider
requests regarding covenant relief, standstill and forbearance of defaults and
restructuring the debt. The plan will likely include restructuring strategies.

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Impacts to automotive supply chains from covid 19

  • 1. Impacts to Automotive supply chains from COVID-19 Purchasing Staff: Le Thi Thuy Ngan
  • 2. The outbreak of COVID-19 is the most significant event to impact the US economy & automobile market Covid- 19 Sales decline Work forces Falling markets Supply chain disruptions
  • 3. COVID-19: The caused for suspended manufacturing  Ford, GM and FCA have suspended manufacturing in parts of the US  Nissan has suspended production in the UK  Daimler has suspended European  Toyota has halted production in Europe  BMW has stated that the closure of its European plants and its factory in South Africa  Honda has closed four US vehicle plants  Toyota Europe is shuttering plans across the continent in the wake of government coronavirus-related shutdowns  Renault is closing plants in Slovenia, Morocco, and Romania  Volkswagen is suspending production as a result of the outbreak
  • 4. “ ” New car sales approximately 17,000,000 units within US for the last 5 years Analysts had predicted the pre-pandemic reduction in sales of 7-10%”
  • 5. Survival and Loss Mitigation Risk Management Plans (1) Diversifying supply chains from a geographic perspective to limit risks from any one country or region where possible (2) Securing multi-sourced key commodities to reduce reliance on individual suppliers (3) Implementing inventory systems to mitigate against supply chain disruption
  • 6. Protect Cash Flow (i) Focus on collecting aged receivables (ii) Extending payables to conserve cash (iii) Government funds
  • 7. Attention to Supply Network (1) Enhance communications and discussions betwwen tiers suppliers (2) Proactively alter supply chain plans to keep plants running at maximum efficiency (3) Pay attention to the status of inventory at the supplier location, supplier production schedules, and status of supplier shipments (4) Implement programs to access data and enhance management and decision making capabilities
  • 8. Implementation Alternative Supply Sources “Alternative sourcing markets will vary greatly by supply chain and manufacturing expertise Countries such as: Mexico, Brazil, India, and Chile is most likely markets in which to diversify beyond China, yet the rate at which the virus appears to be spreading may have diminished these alternatives” Action quickly once plant shut-downs and travel restrictions have eased
  • 9. New Financial Projections Assumptions Forecasts Business plans It is important to prepare current projections that consider the best and worst case If there is a worst-case, the sooner steps are taken to start the restructuring process, the more options your business will have.
  • 10. Develop A New Financial and Operating Plan Protecting working capital •“Cash is king” • Developing and implementing a cost reduction plan Legal and business review of existing credit facility documents • Review loan and bond indenture documents • Proactive develop a strategy to discuss standstill and waiver agreements with the lender • Review the inter-creditor agreements and include all tiers of lenders in discussions Identify any collateral that could secure additional financing • Identify available assets to secure additional financing: real property, inventory and account receivables • Securing new guaranties from principals or other entities in the corporate enterprise Working with a professional legal and financial advisor team to open lender communications • Involving professionals in the process provides significant credibility information as reference to making dicision
  • 11. “ ” What if maintaining existing financing is not viable? Establish strategies: employees, lenders, trade creditors and suppliers, customers and investors Once the board approves a strategic plan, initiating discussions with lenders and other stakeholders will require financial disclosure including projections. Lenders will need to verify financial and operating information in order to consider requests regarding covenant relief, standstill and forbearance of defaults and restructuring the debt. The plan will likely include restructuring strategies.