Peter S. Goodman and Aaron H. Maines

By the time the deadly coronavirus arrived in Italy’s industrial heartland, shutting down his factory and threatening Europe with economic damage, Antonio Falchetti was already a veteran in the battle to contain the global epidemic.

His company, MTA Advanced Automotive Solutions, makes parts for the electrical systems of cars, supplying some of the world’s largest automobile manufacturers. One of its factories sits in Shanghai. As the coronavirus exploded into a public health emergency across China in January, Falchetti was forced to significantly reduce production and operate with a small fraction of his usual workforce.

By February 17, his Shanghai plant was fully up and running. But less than a week later, MTA was facing a problem at another factory, in the Italian town of Codogno: The coronavirus had emerged there, prompting the regional government to close all local plants.

Falchetti, the company’s chief executive, fears the government is overreacting. In effectively quarantining Codogno, a town of 16,000 people about 40 miles south of Milan, Italy risks leaving automotive plants across Europe short of critical components, he says.

“I hope our Italian authorities, and the rest of Europe as well, recognize that a complete shutdown of the facility is not just an Italian problem,” he said in an interview. “It will affect everyone. Ultimately our business — indeed, I think, most business in the world today — is part of a vibrant ecosystem. If you shut down one part of that ecosystem, inevitably it’s going to have effects on other parts.”

The company, in a public statement Monday, urged the Italian authorities to allow it to resume operations using one-tenth of its 600 workers. Otherwise, MTA warned, it would be unable to supply crucial parts to its customers, threatening to halt production at prominent automobile manufacturers across Europe, among them Renault, BMW, Peugeot and Jaguar Land Rover.

READ  Cristiano Ronaldo's goal-scoring heroics sends Juventus shares soaring 17 percent

BMW said it was “continuing to monitor the situation” but had yet to encounter difficulties finding needed parts. A spokeswoman for Renault said the company was still assessing potential impacts and declined further comment. Jaguar Land Rover declined to comment, and Peugeot did not immediately respond to questions.

The drama in Codogno underscored the worries afflicting the world economy as the coronavirus spreads.

Until this week, the epidemic appeared largely confined to Asia. It was mysterious, unsettling and deadly, killing more than 2,000 people. It had disrupted Chinese industry and diminished spending by Chinese consumers.

Experts assumed that China’s economy, the world’s second largest, would slow sharply in the first half of this year before recovering as the epidemic was eventually contained. Given that China is the source of one-third of all global growth, this was enough to provoke worries worldwide, hitting balance sheets for multinational businesses from Apple to major airlines. Still, the locus of concern was China and neighboring countries like South Korea and Japan.

That changed abruptly this week as the coronavirus flared well beyond China, prompting panicked selling across global markets Monday and then again Tuesday. The specter of an epidemic spreading rapidly in Italy raised the prospect of a new shock in a region that was already struggling to muster vitality.

The sense that the virus could swell into a global crisis gained momentum as Iran was identified as the source of cases that have emerged in Iraq, Afghanistan, Bahrain, Kuwait, Oman, Lebanon, the United Arab Emirates and even Canada.

READ  Chinese yuan could hit 7.3 per dollar by the end of the year, CLSA says

Germany, Europe’s largest economy, has in recent months suffered a pronounced slowdown in factory orders as its auto industry grapples with increased fuel-efficiency standards, and as China’s growth slows.

Chinese factories buy enormous volumes of petrochemicals and machinery from German suppliers. The Trump administration’s trade war with China has hurt Germany’s exports by limiting China’s industrial growth. The coronavirus has worsened this trend by keeping Chinese factory workers home.

Britain’s departure from the European Union threatens to curtail investment in Europe as multinational corporations await clarity on trade negotiations about the future of commercial dealings across the English Channel.

Italy has remained a perpetual source of concern for Europe — an economy that has not grown in two decades, with alarming levels of public debt and banks stuffed with bad loans.

As one of 19 countries that share the euro currency, Italy must abide by strict rules on public spending, further limiting growth and making its companies especially dependent on trade. Italy sold some $550 billion worth of goods and services abroad in 2018, according to the World Bank.

“Because of the austerity that is ingrained into Italian economic policy, the domestic market is not growing,” said Servaas Storm, an economist at Delft University of Technology in the Netherlands. “So firms that want to grow have to do it through exports.”

The coronavirus has landed in Codogno and the surrounding region of Lombardy, as well as the neighboring areas of Piedmont and the Veneto. Collectively, they account for nearly one-third of the national economy.

READ  Federal Court Bars U.S. From Enforcing Trump's Asylum Ban

“This is really the industrial heart of Italy,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “You have thousands of small companies that are active in exports. It’s a very dynamic area of the economy, on par with the most developed parts of Germany. It’s also very interconnected.”

That interconnectedness is the element that makes the outbreak a potentially dangerous wild card in the European economy.

More than 12% of Italy’s exports are sold in Germany, many of them auto parts. If Italy’s factories have trouble making their products, that could lead to shortages of components and disrupt plants in Germany and throughout Europe.

This was the point that Falchetti and MTA were making in beseeching the regional government to allow some of its people to get back to work.

“We can’t get the merchandise where it needs to go,” said Maria Vittoria Falchetti, Falchetti’s sister and a part-owner of MTA. “We can’t respect deadlines and delivery dates that we have committed to because of the effects of the lockdown.”



Please enter your comment!
Please enter your name here