In Depth

JCB cuts production as coronavirus component shortage hits

The company joins a list of global companies enacting similar measures as the economic impact of Covid-19 proliferates

Yellow construction vehicle manufacturer JCB has become the first British company to suffer the direct impact of the Wuhan coronavirus, cutting production and working hours in its UK factories.

China’s economy has slowed violently as workers stay home for fear of being infected with Covid-19, which is now known to have killed at least 1,400 people worldwide, and this has meant JCB is already facing a shortage of components, many of which it sources from the world’s second largest economy.

JCB employs 7,500 people in factories in the midlands and north Wales, as well as 15,000 worldwide, mostly in factories in India. Only their British employees will be affected by the shift reductions.

Similar supply issues have already caused “car factory stoppages in Japan and South Korea,” reports Sky News, and the news from JCB “illustrates the widening impact of the outbreak on the global economy.”

“The disruption to the component supply chain in the UK comes at a time when demand for JCB products is very strong,” said JCB chief operating officer Mark Turner, “so while this course of action is very unfortunate, it is absolutely necessary to protect the business and our skill base.”

“Production in the UK has so far been unaffected by the situation in China. However, more than 25% of JCB’s suppliers in China remain closed and those that have reopened are working at reduced capacity and are struggling to make shipments,” he said.

This new reality, Turner said, justified reducing the hours of his employees and scaling back production, saying that the “measures will ensure that, while we will produce machines in lower than anticipated numbers, we will do so with the same number of employees, whose skills we will need to fulfil customers’ orders when the situation returns to normal.”

The private company “is planning to cut working hours for around 4,000 employees from 39 hours to just 34 from next Monday. Overtime has also been suspended. Staff won’t take a pay cut, though - they’ll have to work the hours back later this year,” The Guardian reports.

“JCB’s announcement adds to mounting worries for manufacturers that have struggled to source products from China and underlines the risk to global supply chains from the coronavirus outbreak,” says The Financial Times.

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JCB is owned by the Bamford family, and its chairman is Lord Bamford - a staunch Brexit supporter, and the company “really is the centre of gravity of the construction sector in the UK,” said Chris Sleight, managing director of Off-Highway Research, a construction-focused consultancy.

The family’s factory in Uttoxeter, Staffordshire, which will be affected by the supply issues, was where Prime Minister Boris Johnson demolished a “Gridlock” wall with a “Get Brexit Done” JCB in a campaign stunt.

“Last week, Fiat Chrysler said the impact of the coronavirus epidemic could halt production at one of its European car plants within four weeks,” says the BBC. “Car firms are on alert over possible disruption to Chinese factories and suppliers, but Fiat’s warning was the first to highlight an impact in Europe.”

The coronavirus outbreak has become a “key downside risk” for the euro area’s growth prospects, said the European Commission yesterday. “The longer it lasts, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions.”

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