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How Will Coronavirus Affect the Aerospace, Automotive and Engineering industries?

  • by: Conor McKeon
  • On: 6, Mar 2020
7 min read

The effects of coronavirus or COVID-19 are already being felt across industries, particularly in Aviation, automotive and Engineering-related fields, which rely on manufacturing and large production volumes to meet tight deadlines.

How Has the Coronavirus Already Affected Business?

The Dow Jones sank by 3.6% in the first week of March, and world leaders including US President Donald Trump have acknowledged that the disease will have a marked impact upon global economic growth. A fast-spreading outbreak could reduce the value of the combined Asia-Pacific economies by $211billion, and China’s growth forecast was reduced from 5.7% to 4.8%.

Tata Motors, one of India's largest automobile manufacturers, recently reported that Coronavirus has reduced vehicle production and wholesale volume, meaning lower profits for Jaguar Landrover in the next financial year. Domestic carrier Flybe reports the virus as the reason for its collapse this week, and easyJet and Ryanair are estimated to have lost 30% and 22% of their value respectively.

As experts predict that we are only at the beginning of a global epidemic, how will the illness affect businesses across the technical sectors?

4 Ways Coronavirus Will Affect Technical Industries

1. Market Stability and Profitability

Flight cancellations and flying bans will impact airlines and have a knock-on effect on MROs, OEMs and Aerospace suppliers. Countries around the world have grounded all flights to affected areas such as Italy and refused entry from travellers who live in or who have visited affected countries. British Airways has cancelled hundreds of short-haul flights set to run to and from London Heathrow in March, plus a dozen services on the popular route from New York to JFK, Singapore Airlines and Asiana are reducing flights and Lufthansa has grounded over 150 planes. In addition to the bans, many large global businesses have announced a temporary ban on international business travel and holidaymakers are increasingly concerned about booking non-refundable flights and travel packages. Airlines face damage worth $113 billion from the disease.

The global Automotive market has suffered mounting challenges such as environmental restrictions in the past few years, with China’s sales reducing by 18% since 2018, India’s car sales by 14% in the past 12 months and Germany’s vehicle production by 12% in 2019. After experts forecast 2020 as the year that the sector would pick up due to innovation and investment, COVID-19 is set to cause further disruption. China’s association of automobile manufacturers has overturned previous predictions for a return to stability and has now predicted a 10% drop in sales for the first half of 2020 and 5% for the full year, following the decision of all major Chinese carmakers to delay production. Global Automotive sales are expected to fall by up to 2.5% this year – almost three times the rate predicted at the beginning of 2020.

Reduction in hours worked due to sickness absences, travel bans and overcautious investors could drive delays to projects, research and development. New product launches such as the Mercedes-Benz GLA event have been cancelled or postponed for several months. Various planned product launches and events are likely to be shelved or put off, with consumer interest likely to wane with longer gaps between announcements and launches, and corporate buyers could be restricted from expanding into new lines. Manufacturers are unlikely to innovate during periods of intense pressure to deliver existing projects and compensate for financial losses.

2. Race, Event and Conference Cancellations

After world-famous and historic events such as the Milan Fashion Week, Venice Carnival and Paris Half Marathon have been partially or entirely cancelled, COVID-19 has impacted networking and sporting events across industries.

Prestigious and long-running motor races including Formula One’s Chinese Grand Prix, the first two rounds of the MotoGP championship, the Qatar Grand Prix, the Thailand Grand Prix and the Geneva International Motor Show have all been cancelled. Many motorsport events that attract large crows and require international travel, such as the inaugural round of Formula 1, are currently being discussed.

Aviation and Engineering have also been affected. Leading global composites tradeshow JEC World 2020 in Paris and the upcoming Aircraft Interiors Expo in Hamburg have already been postponed. Other cancellations in the technical sector include Google’s annual developer conference in California and Adobe’s yearly live summit in Nevada, the Mobile World Congress in Barcelona and the Game Developers Conference in San Francisco.

Discussions around the possible cancellation of the 2020 Tokyo Olympics, which involve a large variety of civil engineering and technical projects and contractors, are reported to take place imminently, after Japan’s famous cherry blossom festival was called off.

The cancellation and postponement of industry events has a wide-reaching impact. In addition to missing out on valuable networking and knowledge-sharing opportunities, car and aircraft manufacturers and suppliers have lost vital opportunities to showcase and sell their products and make long-term business deals. Business leaders are unable to anticipate their travel and cannot adequately plan their meetings or forecast for profits.

3. Increased Skills Shortages

Skills shortages have plagued Aerospace, Motorsport and Engineering for the past decades, and COVID19 could see them worsen. Airlines will require 800,000 new pilots and an additional 750,000 technicians by 2037, and global demand for Aerospace skills will overtake supply in the next six years. 22% of UK Manufacturing and Engineering leaders name a shortage of technical workers as their most pressing business problem, and to replace retiring workforces, the UK alone will need to source, recruit and train 1.8 million engineers and technicians by 2025.

The UK’s motoring industry employs 856,000 people and generates £82billion every year, and the UK’s Aviation sector contributes £22billion to the UK economy and provides 230,000 jobs annually. The skills shortage will be worsened due to mass sickness absences, where workers in factories and build environments will be mostly unable to work remotely or from home. Experts predict that 1 in 5 employees will need to take time away from work to recover from the illness. Although the death rate is predicted to be comparatively small, deaths and long-term illness caused by the disease may result in the workforce losing a small percentage of its staff, and grieving relatives will need additional time away from their jobs.

Schools and Universities have already begun closing due to COVID-19. As well as the lockdown in highly affected areas such as Italy and China, schools in Australia, Hong Kong, Japan, Pakistan, India, France and the US have closed hundreds of schools, resulting in over 300million children out of school as of March 2020. Although many students are now taking online classes, some pupils have been out of education for three months, and education officials in various countries have ordered closures until the end of April, which may extend further as the outbreak continues.

School closures will have multiple layers of impact:

· Delayed Next Generation of Engineers – Exams are likely to be disrupted, damaging those hoping to attend University. These are future engineers and technical leaders, and they may either be delayed going to University or starting an Apprenticeship or job for a year, or will be allowed to continue their education or start new jobs with less knowledge and experience that they would normally have, depriving the Engineering industries of vital and urgently needed skills.

· Parent Worker Time – Parents are also impacted, with many still expected to work whilst taking care of home-based children. Countries such as Japan have had to relax strict working policies to facilitate flexible hours and working from home, however these options are more difficult or non-existent for manufacturing-based or manual jobs. Engineering employers will need to assess the working options for employees across departments and levels to maximise output in the event of a coronavirus outbreak.

· Delayed Investment in Engineering Subjects – With reduced abilities to teach and country budgets focused on virus containment and treatment, Governments could halt planned investment into technical skills. Since 2017 UK government has steadily increased its investment into engineering careers across sectors, however Britain has one of the world’s largest funding gaps between academic and technical education and recent pledges to spend £400million on technical education will compensate for only 25% of the technical education cuts of 2011. With the current difficulties to provide basic education to pupils of all ages, getting students through existing educational requirements in core Academic subjects will be the priority for most schools, colleges and Governments, delaying progress in promoting Engineering education and creating the next generation of technicians.

How Can Leaders Reduce Business Damage from COVID-19?

· Get Informed – Subscribe to government updates for your country and reliable national news to ensure you are the first to know of any virus changes or new employment guidelines.

· Make a Plan – Gather a project team of senior individuals across departments to assess the potential impact of the illness and create processes for communication and workforce contingencies in the event of a worst-case scenario.

· Employee Engagement – Run an internal communications campaign with top tips on hygiene in the workplace alongside coronavirus facts, and publicise this across emails, meetings and flyers in common areas to ensure all staff know, respect and follow these rules. Communicate regularly and consistently so your staff know that you are taking the virus seriously, and as senior leaders speak directly to your workforce to reassure them that you have a plan that best protects their welfare and their jobs.

· Reinforce Partnerships – Speak with your recruitment company to plan hiring strategies and workforce retention plans through difficult time periods.

Looking for help with workforce planning in the coming months? Contact our team of technical recruitment consultants.

Read our Global Aerospace & Aviation Report or Automotive Market Predictions for 2020.

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