Fiat is working to secure the future supply of affected parts © Nebojsa Raus/AFP/Getty Images
Fiat is working to secure the future supply of affected parts © Nebojsa Raus/AFP/Getty Images

Fiat closes 500L plant in Serbia

17 February 2020

Car maker, Fiat Chrysler, has halted production at its Kragujevac plant, Serbia, due to a lack of available Chinese parts caused by coronavirus.

The automaker has temporarily shut down its plant in where it currently builds its Fiat 500L model. 

A spokesperson said the planned downtime at the plant had been rescheduled “due to the availability of certain components sourced in China”.

“We’re in the process of securing the future supply of those affected parts,” the spokesman said.

The shutdown comes less than a month after Fiat Chrysler's chief executive, Mike Manley, revealed four of its Chinese suppliers had been affected by coronavirus, including one “critical” maker of parts. 

Malcolm Harrison, group CEO at CIPS said: “This is a prime example of how anyone can be caught out when supply does not meet demand. Efforts to contain the virus are ramping up, but maintaining the flow of goods in global supply chains feels like it might be a leaky bucket. When one issue is resolved, another appears."

He added: “Supply chain managers will have to act very quickly now to ensure supply of essential components and to minimise further impact on their operations. Whilst uncertainty remains in terms of open supply routes from China, the same issue could well happen in other regions of the world too, in a very short space of time. For many businesses, it is probably already too late to put short-term mitigation strategies in place."

He continued: "Best practice in procurement and supply chain management dictates there should always be alternatives in order to minimise risk. If there is only one supplier, procurement professionals should make sure they have sufficient stock.

“It is the responsibility of the supply chain manager to build in resilience through multi-sourcing, including investment in other suppliers to ensure continuity, or holding additional levels of stock, not just lowering costs. This black swan event is now beginning to seriously de-rail supply chains and affect business productivity in addition to the cost in human lives. Keeping fingers crossed and hoping for the best will not do. We must all remain vigilant to reduce the effects of the pandemic through strong sourcing strategies or sufficient levels of stock,” he said. 

Meanwhile, Kering, the parent company of luxury brands such as Gucci, Saint Laurent, and Balenciaga, said it is shuffling its supply chain in order to mitigate the impact of the virus after it was forced to close 50% of its stores in mainland China. 

In its fourth-quarter earnings call, Kering’s CEO, François-Henri Pinault, told investors inventory was being reallocated to the other regions of the world “to make sure that we're not too heavy on stock in China”.

"Due to the evolving nature of this situation, it is impossible at this time to fully evaluate its impact on our businesses and how fast they will recover. We are hearing lots of different theories on the speed and shape of the rebound, but the reality is that it is too early to predict,” Pinault added. 

Last week, sportswear brand Under Armour said it expected a hit of up to $60m following the outbreak, as well as a potential impact on materials such as fabric trim, package sourcing, delays and capacity challenges.

At Fiat, the plant is expected to be restarted later this month and the closure is not expected to impact the total production forecasted for the month, its spokesperson added.  

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