Yellow digger maker JCB is to cut production and working hours at its UK factories owing to a shortage of components from China, marking the first significant impact of the coronavirus outbreak on a British manufacturer.
The private company will reduce the working hours of about 4,000 employees from Monday from 39 to 34 hours a week.Workers will be paid for a 39 hour week and bank the hours, working them back later in the year. Overtime will also be suspended, the group said on Thursday.
More than 25 per cent of JCB’s component suppliers in China remain closed as a result of the Covid-19 outbreak that has spread from the city of Wuhan in Hubei province and killed more than 1,300 people worldwide.
The factories that are open are working at reduced capacity and struggling to make shipments, the construction equipment producer said. JCB sources hundreds of components from China, such as electronic parts and castings, which are used to build its construction and agricultural vehicles.
“The inbound supply of certain components from Chinese partners will be disrupted in the coming weeks as they seek to replenish their stocks,” said Mark Turner, JCB chief operating officer. “This inevitably means we will not have the required amount of parts needed to build our forecast number of machines in the short term.”
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.
Last week, carmaker Fiat Chrysler warned that one of its European plants would be forced to halt production soon as it struggles to source parts from Chinese suppliers. Meanwhile, Hyundai shut all of its car factories in South Korea after running out of components. Global tech companies’ supply chains, which are also heavily reliant on parts from China, have also been disrupted by coronavirus.
“JCB 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. He added that the company uses a high number of specialised components from China. “You can’t just switch supplier overnight.”
The Staffordshire-based company, known for its distinctive yellow machines found on building sites around the world, gave no timeline of when normal production would resume. “The industry as a whole is just-in-time supply chains so if a manufacturer the size of JCB is affected like this, you’d expect others to be,” added Mr Sleight.