CNN goes to ground zero of Wuhan coronavirus outbreak in China
New York (CNN Business)Several major American companies with big investments in China are preparing themselves for potential disruption from the spread of the deadly Wuhan virus.
“We are in an era of just-in-time delivery and minimal inventories, so in many cases it probably wouldn’t take long before shortages would show up in supply chains, and consumers might notice delays in product arrival,” William Reinsch, the Scholl chair for international business at the Center for Strategic and International Studies, told CNN Business.
He said that US companies with ties to Wuhan “should be worried.” However, with the ongoing tariffs and rising Chinese labor costs, US companies have recently been moving some manufacturing from China to other countries.
“That’s a long term trend that has been going on for some time, but it will make the effects of the virus less significant now than four or five years ago,” he said.
Still, some companies could feel the impact as the virus spreads. It has killed more than than 100 people and there are more than 4,500 confirmed cases in mainland China, according to health officials in the country. Dozens of others have been infected worldwide, including at least five confirmed cases in the United States.
US businesses with a major manufacturing presence in China could be affected if factories remain closed longer than the planned Lunar New Year shutdown. Beijing extended the holiday from January 30 to February 2 to try and prevent the spread of the virus.
Apple’s production of the iPhone could be hit hard, according to the Nikkei Asian Review. The report said suppliers are nervous they can’t meet Apple’s demand to increase production of the phone because of the coronavirus has spread to Hubei Province where some plants are located.
The company has plants elsewhere in China that make other iPhone parts, notably the Foxconn facilities in Shenzen, which is roughly 600 miles away from the epicenter of the disease.
Apple (AAPL) didn’t respond to CNN Business’ request for comment. But investors and analysts are likely looking for Apple CEO Tim Cook to address the situation on its earnings call Tuesday.
General Motors (GM) is another US company in Wuhan. The car company operates a manufacturing plant with GM’s Chinese partner SAIC and Dongfeng Motor Corporation, which is one of the country’s largest auto groups. The GM-SAIC plant in Wuhan has about 6,000 employees, about 10% of GM’s total work force in China.
GM previously told CNN Business that it is staying abreast of the development and advising employees who don’t feel well to not come to work. “The most important thing is to contain the virus – production is secondary to the health of the team and community,” said a GM spokesman.
The disruption is coming at a “critical” time for Tesla (TSLA), according to Dan Ives, an analyst at Wedbush Securities, as it ramps up production from its new factory in Shanghai. But, for now, Ives doesn’t predict “any major disruption on the horizon.”
Several well-known food companies, including Starbucks (SBUX), McDonald’s (MCD) and KFC have also limited operations in Hubei.
Nike (NKE) brought in $6.2 billion in revenue from the Greater China region in 2018, up 21% from the prior year compared to just 7% growth in North America. China has been Nike’s fastest growing market for the past two years.
Under Armour (UA) is another sportswear company with a heavy presence. While it does not break out revenue from China, its sales in Asia Pacific have grown faster than in other areas.
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