Automakers struggle, as pandemic keeps most people home, off the road

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The spread of the coronavirus led major auto makers such as Volkswagen, Ford Motor Co. (NYSE: F), Toyota Motor Corp. (NYSE: TM), General Motors Co. (NYSE: GM) and Daimler to shut down plants in March. Volkswagen has canceled its full-year forecast because of the shutdown.

“It is currently not possible to determine when a new outlook can be made for the full year,” Volkswagen said in a statement. “The impacts resulting from the pandemic on customer demand, the supply chain and production cannot currently be accurately forecasted.”

J.D. Power expects U.S. auto sales this year to fall between 12.5 and 14.5 million vehicles, a decrease from around 16.5 million to 17 million cars and trucks before the coronavirus outbreak.

Meanwhile other businesses are looking to restructure, as car sales drop. For example, Tata Motors Ltd., the owner of Jaguar Land Rover, plans to separate its cars business from trucks and buses, as the company seeks partners for a unit that has been hurt by the pandemic. Tata Group bought the maker of the Jaguar XE sedan and the Land Rover Discovery sport utility vehicle from Ford in 2008 for $2.3 billion.

The impact is also hurting pending auto deals. BorgWarner Inc. (NYSE: BWA) is threatening to walk away from its $1.5 billion purchase for Delphi Technologies Plc after the latter auto parts supplier tapped out its credit line without receiving permission from the buyer. Delphi drew down its full $500 million revolving credit facility to position for the downturn related to the coronavirus, the company said. BorgWarner gave Delphi notice that this breached their agreement announced in January and that it has 30 days to resolve the issue.

“Both BorgWarner and Delphi Technologies continue to believe in the long-term strategic value of the transaction and, at this time, are still working together towards closing the transaction in the second half of 2020,” BorgWarner said in a statement. “There can be no assurance, however, that BorgWarner and Delphi Technologies will reach a mutually acceptable resolution or that the transaction will close.”

Car dealerships are feeling the brunt from the slowdown in production and sales too, terminating some deals. Asbury Automotive Group Inc. (NYSE: ABG) has backed away from its $1 billion acquisition of Park Place Dealerships. The purchase was supposed to expand Asbury’s presence in Texas, while growing its portfolio of luxury brands.

The auto industry will continue to face challenges until people can travel again.

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