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Supply Chain News: Many Factory Closures becoming Permanent, not Temporary, as Virus Accelerates the Fate of Plants

Apple Moving Production out of China, but not not for US

May 12, 2020
SCDigest Editorial Staff

GE's hugely successful jet engine business has been a star performer for many years even as other GE divisions struggled, sending its stock price reeling.

But those decades of success couldn't save it from the ravages of the coronavirus crisis.

Supply Chain Digest Says...

Companies that haven't invested in more efficient plants will struggle to keep operating them profitably while demand is much lower.

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GE Aviation, headquartered in massive manufacturing complex in a northern suburb of Cincinnati, announced last week it would eliminate about 13,000 job, some 25% of the total, as demand from aircraft manufacturers and airlines for new planes has dropped for now to near zero, with flights at a tiny fraction of usual levels, and planes parked in giant lots.

The worse news: GE customer Boeing says recovery in the aircraft market will take years.

With many other factories and workers now or before long facing similar fates – consider all the other suppliers of parts and assemblies for those Boeing aircraft - the scary question is how many of shuttered plants will move from temporarily closed to permanently gone.

For example, the Wall Street Journal this week reported that Michigan Maple Block Co. furloughed most of its 56 workers at its plant in Petoskey, MI, when the state implemented a stay-at-home order on March 24.

But one month later, the manufacturer of cutting boards and industrial table tops told employees their status had changed from furloughed to fired, as the plant would close for good. The company is moving all the work to a lower cost factory it has in Pennsylvania.

But it's not just small plants that are shutting permanently. Outdoor equipment maker Polaris plans to permanently close a plant in Syracuse, IN, while Goodyear Tire & Rubber is doing the same with a plant in Gadsden, AL.

There are plenty more examples already at companies large and small.

Dish maker Lenox Corp. is closing its last factory, in Kinston, NC, and laying off 159 employees, as it is moving production in the face of a devastated department store environment to contract manufacturers in Asia.

Blue Bell Mattress announced it was closing its plant in Roseville, MI, after losing its only two retail customers within a few weeks.

The Wall Street Journal reports that Robert Atkinson, president of the Information Technology and Innovation Foundation think tank, as saying companies that haven't invested in more efficient plants will struggle to keep operating them profitably with demand now much lower.

(Article Continued Below)



"Manufacturing is becoming a stagnant sector," he told the Journal.

Meanwhile, better news for workers at US automobile factories in the US and the parts makers they rely on, as the OEMs will soon re-open their US factories – though how many customers will be in a position to buy those shiny new cars remains a question.

There is also some hope more production work will migrate out of China, blamed widely for not being honest about the details of the virus crisis, to the US.

There were rumors this week, for example, that Apple will be moving 20% of its iPhone production out of China – but not back to the US, but to low cost India instead.

Any reaction to the factory closings? How bad is it going to get? Let us know your thoughts at the Feedback section below.


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