Global companies enter lockdown mode as coronavirus outbreak rocks China
We’ll continue to update this story with the latest developments.
The new coronavirus has now infected more than 7,700 people globally. All but 68 cases were reported in China, which is also where all 170 deaths have occurred.
While the markets dipped over the weekend, the indexes saw significant recoveries by Tuesday. At the company level, however, there is still plenty of concern. Multinationals—companies with offices around the world—across the board are responding by placing restrictions and outright bans on employee travel to China, indefinitely closing offices in China, and telling employees to work from home.
Google is shutting down its offices in mainland China, Hong Kong, and Taiwan and restricting employee travel to China and Hong Kong. The company has instructed employees flying back to the U.S. from China to work from home for 14 days before returning to the office.
Apple, Facebook, JPMorgan Chase & Co., Ford Motor Co., and Kraft-Heinz Co. have also instituted employee travel bans to and from China to reduce risk of exposure to the virus. The Dubai state-controlled port operator DP World has also banned workers from traveling to China, where it runs three ports on the mainland, and one in Hong Kong.
The Hong Kong branch of PricewaterhouseCoopers suspended all employee travel to Wuhan, the center of the outbreak, and is requiring all employees who have traveled to Wuhan and anywhere else in Hubei province to work from home before returning to the office.
“Staff returning from Hubei are required to remain isolated for 14 days with remote working before returning to the office, while reporting their health and wellness to us regularly. Meanwhile, we are also avoiding non-essential travel to minimize the risk of spreading any infection,” a spokesperson for PwC Hong Kong said.
Similarly, HSBC has instituted a ban on travel to Hong Kong until February 11, and an indefinite ban on travel to mainland China. “We are encouraging employees in Hong Kong to consider working from home, where possible,” Europe’s largest bank said in a statement, adding: “We are asking those who have travelled to mainland China or been in contact with anyone who has travelled to or through Hubei Province in the last 14 days to stay home for a period of 14 calendar days.”
The Hong Kong branch of Ernst & Young has also asked employees to work from home this week, and enacted similar self-quarantine and health monitoring measures for employees who recently traveled to Hubei province. EY mainland China offices extended the Lunar New Year Holiday period in accordance with Chinese state council and local government measures.
South Korean electronics giant LG was one of the first companies to restrict employee travel to China due to the virus, and it has now instituted a blanket ban, entirely barring LG employees from going to China. Apple and Facebook have not issued full bans yet and are still allowing for “essential” travel to China.
Meanwhile, France’s PSA Group is flying its workers home from Wuhan, a major location for the automotive industry, in line with the advice of the French authorities. Renault also has a plant there, but it was already shuttered until February 10 for the New Year holiday, and the company said it is working with the Chinese authorities to monitor the situation. American automotive company Tesla has temporarily shut its factory in Shanghai as part of an order by the Chinese government, which will cause delays in Tesla’s Model 3 production.
Japanese carmakers Nissan and Honda are pulling their employees from the Wuhan area and Toyota, which does not have facilities there, has banned staff from traveling to China. Webasto, the German auto-parts supplier that has found itself the base for Europe’s first confirmed person-to-person transmissions of the virus, has banned all travel to and from China.
Siemens, the German industrial giant, has a transformer plant in Wuhan. The company told Fortune Thursday that while it does not have any travel-ban policy at the moment, it is advising staff to travel to China only if the trip is business-necessary. “In other cases, our recommendation is to postpone the trips or switch them to virtual meetings, phone conferences and so on,” said spokesperson Julia Wiemer.
Bosch, another major German automotive supplier with two plants in Wuhan, said it has told staff to cancel or postpone all business trips to and from China until the end of February.
Even businesses that don’t introduce travel bans may soon find themselves unable to fly employees to China, as major airlines reduce and cancel flights to China in response to the outbreak—both to mitigate infection risk and because demand has dropped so much.
United Airlines reduced flights to Beijing, Shanghai, and Hong Kong; American Airlines reduced China flights over lack of demand; British Airways halted its daily Beijing and Shanghai routes; and the Dutch airline KLM also suspended China flights. Indonesia’s Lion Air will cancel all flights to China from Saturday.
Cathay Pacific, Hong Kong’s flagship airline, will cut flights to mainland China by more than 50%, in line with Hong Kong’s ferry, train, and bus restrictions on mainland routes.
The Trump administration is reportedly considering a government ban on all flights between the U.S. and China.
The Centers for Disease Control and Prevention, which previously advised U.S. citizens against nonessential travel to Wuhan, expanded its warning on Tuesday and recommended that Americans avoid travel to all of mainland China.
Store closures and supply chain risks
During the 2002-2003 SARS crisis, Swedish furniture giant IKEA had just two stores in China. Now it has 30, and the company announced on Thursday that it is temporarily closing all of them in light of the virus.
China’s role in the global economy has transformed since the SARS outbreak, which ended in 2003. At the time of SARS, China was a new World Trade Organization member—having officially joined in December 2001—and multinationals had a much more modest presence than they do today.
Starbucks, which opened its first China store in 1999, now has 4,292 stores in mainland China. It is closing half of those stores in response to the coronavirus. China is the coffee chain’s fastest-growing market and, after the U.S., its largest.
Starbucks said it was expecting the virus outbreak to “materially effect” its financial results for the rest of the year—a potential wrench in the company’s plan to open 6,000 stores in China by the end of 2022.
IKEA, which opened its first China store in 1998 but only had two in operation during SARS, may also see its expansion plans go awry: the company invested $1.4 billion in China in fiscal 2020 as part of a three-year growth strategy for its China market.
Apple—which had zero stores in China during the SARS outbreak—reduced operating hours for its China stores and closed one branch, which IKEA also did before it announced total store closure. Apple opened its first store in China in 2008.
China accounted for 16.7% of Apple’s total revenue in 2019, and the virus fallout is already impacting retail sales. Apple’s supply chain might also be disrupted: most iPhones are manufactured in China, and Apple’s production facilities there have stayed shut because of the outbreak.
Disney closed the gates at its Shanghai theme park, which opened in 2016, and its Hong Kong theme park, which opened in 2005.
In Hong Kong, which confirmed 10 coronavirus cases, the government has closed public sports facilities, cultural centers, and museums. Civil servants have been instructed to work from home and the government has encouraged private firms to let their employees stay home as well.
The U.S. evacuated 201 Americans from Wuhan on Tuesday. More than a dozen countries including Canada, Japan, New Zealand, and the U.K. are also evacuating their citizens from Wuhan.
However, there are reports of difficulties in these evacuation efforts. On Thursday a U.K.-government-chartered flight was not cleared for takeoff in Wuhan, leaving around 200 Britons stranded rather than heading home as planned. Australia is also still awaiting permission from the Chinese authorities to execute its own evacuation from Wuhan.
It’s no question that the fears around coronavirus have sent businesses into a frenzy. Just how long will this economic uncertainty last? It all depends on the speed and duration of the outbreak, but it’s certainly not over yet. The World Health Organization is meeting again on Thursday to discuss declaring the outbreak an international public health emergency.