The impact of the new coronavirus in China is forcing some Dayton-area companies with Chinese connections to navigate financial and operational challenges.
The virus has killed 1,873, and health officials say half of China’s 1.3 billion population remain subject to varying forms of travel restrictions and other quarantine measures.
The epidemic may cause the global economy to shrink this quarter for the first time since the 2009 recession, according to Capital Economics in London.
The president of Preble County’s Henny Penny said his company’s food equipment manufacturing operation in Suzhou, China is slowly resuming production. Other Dayton-area companies are weathering fast-paced changes in a country where 20 percent of the world’s manufacturing is based.
About 35 of Henny Penny’s 60 Chinese manufacturing workers have been able to return to work so far, said Steve Maggard, president of Eaton-based Henny Penny.
“Last Tuesday, our first people were able to come back,” Maggard told the Dayton Daily News.
In an industrial park that serves as home to some 3,000 companies, Henny Penny’s relatively small Chinese operation is approximately the 600th that has been permitted to resume work, Maggard said.
His hope is that by March 1, Henny Penny’s operation there will once again be fully staffed. Henny Penny’s workforce in Suzhou consists of about 15 office workers and about 45 production workers.
Chinese authorities are implementing stringent rules as work resumes: Employees have their temperatures taken at the start and end of each work day, Maggard said. No outside vendors, guests or visitors are allowed inside a workplace. Face-masks are being worn, and disinfections are a regular part of the work day.
“It’s just very structured and rigid,” Maggard said. “You have to control any outside influence that could come into the facility.”
That’s challenging in a city that is home to more than 10 million people, he said.
Workers must be cleared and quarantined to be able to return to their jobs if they are not from the area or province where they are working, Maggard said, adding that the company’s own general manager in the region has had to spend two weeks in Shanghai because he does not hail from Suzhou.
Henny Penny’s biggest customers in China include McDonald’s and KFC, restaurant chains that are wrestling with their own operational challenges tied to the virus. And many customers are simply staying home, not going out to eat, which is also impacting business.
“While we don’t know the long-term effects of what that means, it’s clearly going to have some impact, at least in the first quarter and probably into the second quarter of the year on our volume,” Maggard said.
Chris Riegel, founder and chief executive of Dayton-based digital signage and technology company Stratacache, thinks the impact may well be deeper.
“This will materially impact probably most global companies into the second quarter and probably into the third quarter,” Riegel said.
However, much of the Chinese nation was celebrating the Chinese New Year from late January until early February — so many facilities were closed anyway, mitigating the impact somewhat, Maggard said.
“They take like two weeks off anyway,” he said. He estimates that perhaps a week of Henny Penny production in China has been lost.
Stratacache has about 250 production workers in China, with about 50 design and technical workers.
“China still remains shut down effectively,” Riegel said. “Each week, we get communication from the government that pushes it back another week.”
However, he believes the situation is starting to improve. “I think in the next two weeks you’ll see them start to come back down.”
Riegel said China is experiencing what he called a manufacturing “cascade effect.” Steel production is affected, which affects further manufacturers downstream, sheet metal companies, automotive producers and others.
“We’re optimistically hoping that the Chinese authorities can put this in control in the coming weeks,” Riegel said. “But we’re cautious.”
HIGHER EDUCATION COVERAGE: WSU president: ‘We are open for business’
If this is not a one-time event, it could become “much more of a strategic problem,” he added.
Asked about shifting his supply chain outside China, Riegel said many companies have done that or are starting to do that anyway due to the recent trade war. But that can go only so far, he added.
“For the industry we are in, there are a lot of things you can’t do competitively outside of China,” he said.
He does expect Chinese authorities to improve the business environment there.
Auto glass producer Fuyao Group is based in China. Leaders of Fuyao Glass America in Moraine say they are monitoring the situation. On Tuesday, the company said none of its employees have been directly affected, as none have traveled to Wuhan, China recently.
The company has about 2,300 workers in Moraine. Globally, Fuyao Glass has more than 25,000 employees.
Last week, Caterpillar said most of its Chinese suppliers have returned to work.
Huffy has much if not nearly all of its bicycle manufacturing anchored in China. Spokespeople for Huffy, which is based in Miami Twp., did not respond to a message seeking comment in time for publication.
Apple has acknowledged that its supply of iPhones will be limited because production was ramping up more slowly than expected.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the New York Times quoted Apple as saying.
China’s National Health Commission reported 1,886 new confirmed coronavirus cases in mainland China Monday, the first time the daily tally has fallen below 2,000 since the beginning of the month, the Wall Street Journal reported.
Thank you for reading the Dayton Daily News and for supporting local journalism. Subscribers: log in for access to your daily ePaper and premium newsletters.
Thank you for supporting in-depth local journalism with your subscription to the Dayton Daily News. Get more news when you want it with email newsletters just for subscribers. Sign up here.