COVID-19 in the Manufacturing Landscape

COVID-19: Latest Developments and the Impact on Manufacturers

As the unprecedented COVID-19 epidemic continues to unfold worldwide, uncertainties abound. News outlets are readily reporting on the effects this pandemic is having on health, jobs and the economy, and some analysts predict the impact will reverberate for decades. For manufacturers, this goes far beyond the supply chain disruptions that were initial concerns. What’s clear is that the manufacturing industry is standing together to not only mitigate the harm that the crisis is having on its sector but is also mobilizing to aid in COVID-19 relief efforts. Learn more about the legislative and administrative actions being taken and what they mean for equipment and product manufacturers.

A Stimulus Boost in Uncertain Times
After delays and intense negotiations, the Senate approved a $2 trillion stimulus package (known as the CARES Act) on March 25, 2020 to help alleviate financial worry erupting from the coronavirus pandemic. The package, the most expensive emergency aid deal in U.S. history, was voted on 96-0 and received overwhelming bipartisan support. The majority of the deal entails the following: $250 billion for direct payments to individuals and families, $350 billion set aside for small business loans, $250 billion in unemployment insurance benefits and $500 billion allocated for loans to distressed companies. The government hopes this massive stimulus will help boost the economy as much of it has recently shutdown over COVID-19 fears, leaving increasingly growing numbers of the American workforce without a job.

COVID-19’s Potential Economic Impact
To get an idea of the potential economic impact COVID-19 could have on manufacturing, industry statistics cite that the trade impact on the machinery sector could cause severe financial losses worldwide. As China currently manufactures nearly 20 percent of the world’s intermediate products entered into the global supply chain, disruptions are likely to follow. Upwards of $1 billion in losses are expected in the European Union, $558 million in Japan and over $300 million each in the United States, Singapore, Mexico and South Korea.

U.S. Gross Domestic Product (GDP) is expected to drastically decline due to the continued shutdown of manufacturing facilities, with economists forecasting a 24% decline in GDP in the second quarter of 2020. Global stock markets have suffered drastic falls due to the pandemic, with Dow-Jones reporting its largest single-day loss (nearly 3,000 points) on March 16. Due to coronavirus-related travel restrictions, the travel and tourism industries have reported revenue losses, while the car and oil industries are also expected to take a hit as a result of a less overall need for immediate travel. Could this lead to future layoffs or pay cuts as companies scramble to make up for this ding in revenue?

Short-term and Long-term Effects on Manufacturing
The ongoing COVID-19 pandemic has hit many industries in unexpected ways, particularly the vastly diverse manufacturing industry, which employs 13 million workers in the U.S. In the short term, manufacturers deemed essential by the government are struggling to meet the high demand for the personal care, pharmaceutical and medical PPE products vital for survival. Others are experiencing extreme drops in demand, causing major disruptions across the board. Adding to the pressure, the mandatory social distancing measures currently in place have changed the way manufacturers operate, with an estimated 40%-50% of its workforce unable to perform their job functions as normal, causing considerable job loss and reduced output across a wide range of sectors.

Manufacturing industry experts are predicting that the long-term effects of COVID-19 will be far reaching for years to come. A recent survey done by PricewaterhouseCoopers shows that manufacturers’ top three concerns with respect to COVID-19 are financial impact (75%), a potential recession (70%) and the effects on its workforce/reduction in production (41%). Supply chains, crucial to manufacturing, are expected to be hit hard nationally and internationally as suppliers will likely continue to face operational and financial struggles. Industry statistics cite that 75% of companies have reported supply chain disruptions in some capacity during the pandemic, a clear indicator of the virus’ impact on the manufacturing environment.

While preliminary, these effects are already staggering and their long-term results could be irrevocable. Only time will tell if the global economy will recover from such a swift, hard-hitting blow.

COVID-19 Relief Efforts for Manufacturers
Manufacturers and related industry associations, like the Association of Equipment Manufacturers (AEM), are working with Congress, the White House and various state and local governments to lessen the negative effects COVID-19 is having on its industry. They’re pushing for funding for small businesses, including equipment dealers, impacted by the pandemic. Additionally, AEM joined the Transportation Intermediaries Association in part to urge the Federal Motor Carrier Safety Administration to work with states to ensure that goods and manufacturing components categorized as essential are not subjected to delivery impediments due to state emergency orders during the COVID-19 crisis.

Like AEM, other manufacturing associations and companies are doing their part to aid the industry during these uncertain times. According to the National Association of Manufacturers (NAM), companies far and wide are stepping in to help with this escalating situation. Big names like Mercedes-Benz, General Motors, General Electric and others are building ventilators, masks and respirators to help assist with the grave shortage. Both Honda and Toyota are offering their services by repurposing manufacturing lines for essential equipment.

The NAM and its Council of Manufacturing Associations reached out to its member base for assistance, specifically seeking those who would be willing to utilize their facilities and equipment to assist in manufacturing parts and supplies related to COVID-19 relief. More than 1,600 companies agreed to assist. The NAM is working to coordinate with the Federal Emergency Management Agency to urgently get these supplies to where they’re needed. As an example, one company provided 75,000 gloves, 3,000 Tibex suits and nearly 20,000 facemasks, all picked up by the government and sent directly to New York City to aid in relief efforts. To provide desperately needed funding to manufacturers and small businesses, the NAM is requesting that the federal government create the “Manufacturing Resiliency Fund” which would entail $1.4 trillion in loans.

Ensuring the Viability of the U.S. Manufacturing Economy — Now and Into the Future
Despite mounting challenges, the manufacturing industry continues to advocate for its workforce and for its own viability. It’s calling on the federal government to devise and implement a solid strategy for manufacturing to help strengthen the national economy, create jobs and assure the industry that the U.S. is the ideal location for product and equipment manufacturers to continue their day-to-day operations. A statement issued by Dennis Slater, President of the Association of Equipment Manufacturers (AEM), called for the U.S. government to “take strong and immediate action to support equipment manufacturers, protect the 2.8 million jobs they support, and guarantee the viability of an industry that is essential to the economic and national security of our country.” Specifically, AEM is asking the federal government to consider the following proposal:

• Form a national institute to provide a hub for federal manufacturing programs and coordinate federal manufacturing policy across agencies
• Establish a Chief Manufacturing Officer to be responsible for developing and implementing the national manufacturing strategy — reporting directly to the President of the United States
• Create a National Manufacturing Council to offer non-partisan advice to the President on ways to strengthen the manufacturing industry and ensure the competiveness of the U.S. in the global manufacturing landscape.

AEM is encouraging other industry associations and groups to join them in working with elected officials and the federal government to cement the United States’ leadership in the manufacturing economy and guarantee its endurance into the future. Their efforts, along with those of key industry players, make it clear that the manufacturing industry is doing what it can to be a part of the solution to this growing crisis and is laying the groundwork to help protect the industry against future public health emergencies.

Coming Together During These Unprecedented Times
At Clarion Safety, we understand that many of our customers are facing challenges during these ever-changing times, and we’re here to help keep the supply chain related to your vital equipment running with our best practice, standards compliant safety labels, signs and tags and industrial printing solutions. Here in our home state of Pennsylvania, Governor Wolf has declared Clarion Safety as an essential business, and we’re doing everything we can to ensure that you don’t experience any impact on your orders. Rest assured, your business is important to us, and our team is here to address any questions or concerns you may have. Please reach out to us and let us know how we can help — we’re standing by!

This blog was originally posted on 4/2/20 and has been updated with new information throughout.

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