Minnesota companies starting to feel sting of coronavirus outbreak in China

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MINNEAPOLIS – Companies in Minnesota and across the U.S. are starting to see disruptions caused by the fast-growing outbreak of a pneumonialike coronavirus that has shut down business in some of China’s largest cities.

Minnesota companies such as 3M, Medtronic and Cargill said they have not yet had major issues, but they have adjusted their operations and are ready to pivot should the situation change. Polaris said on a conference call that shipments from its suppliers are still getting to the U.S., but the recreational vehicle maker is unable to send employees there to work out future deals.

Other U.S. companies are signaling more serious consequences. Ford and Toyota said they are idling some of their vast Chinese assembly plants for an extra week. Apple is rerouting supply chains and Starbucks has closed more than half of its 4,292 stores in its second-biggest market and said it would take a quarterly and full-year financial hit.

On Wednesday, British Airways suspended all flights to mainland China, while United Airlines, American Airlines and Air Canada are joining the growing number of carriers reducing service.

The full extent of the hit to the broader business world is not yet clear. Most of China had already been shut down since at least Friday for the annual Lunar New Year holiday, a weeklong nationwide hiatus. But with the outbreak showing no signs of slowing, many companies are already preparing for a longer slowdown.

“Our members are dealing with varying degrees of disruption in their businesses, including supply chain issues, temporary closings of some retail outlets and factories, and other challenges,” said Jake Parker, senior vice president of the US-China Business Council, which represents major companies. “If travel restrictions and quarantines are expanded or the holiday extended beyond Feb. 8, that will amplify these problems.”

China has become an essential part of the modern global industrial machine. China alone accounts for roughly one-sixth of global economic output. It is the world’s largest manufacturer and trader.

But China’s importance goes beyond what it makes. Its consumers buy more cars and smartphones than anybody else. When they go abroad, Chinese tourists spend $258 billion a year, according to the World Tourism Organization, nearly twice what Americans spend.

China has cut off access to the central city of Wuhan, the epicenter of the outbreak, and 16 other cities to prevent people from leaving and spreading the virus further. That has trapped more than 50 million people in the most far-reaching disease control measures ever imposed. The outbreak has infected nearly 8,000 on the mainland and abroad and has killed more than 150 people.

Minnetonka-based Cargill Inc. has a large and growing presence throughout China, including in Hanchuan, about 10 miles west of Wuhan. The global agribusiness is asking its employees to cancel business travel to Wuhan and Hubei Province, where the outbreak originated, until the outbreak is better understood.

“The safety and well-being of our colleagues is our top priority,” said April Nelson, a Cargill spokeswoman. “We also have flexible work options and support services for any employees that have been exposed to coronavirus or have traveled to Wuhan.”

Before the outbreak, several Minnesota companies, including Cargill and Austin-based Hormel Foods Corp., had planned to suspend production for the Lunar New Year.

Hormel will resume production, as planned, on Monday and is asking all of its office workers in China to work from home an additional week until Feb. 10.

Cargill’s workers throughout China are just now returning to work from the holiday. The company said it will further suspend production or temporarily close offices if needed.

Medical-device maker Medtronic, which is run from offices in Fridley, said the virus has had no direct impact on its workers in China nor its operations in the country, though the situation remains “fluid.”

China is a major manufacturing and research location for Medtronic. The med-tech company has 843,000 square feet of manufacturing and R&D space in the country, according to securities filings. China is also one of Medtronic’s four largest markets for sales, along with the U.S., Western Europe and Japan.

“While we continue to support our employees in the region, Medtronic is also contributing to efforts in China through donations of medical technology and supplies to support patient treatment and recovery,” spokesman Ben Petok said in an email. “This is a dynamic event and we will continue to monitor the situation and provide updates to our employees and customers as the situation warrants.”

3M has ramped up production of its respiratory masks at factories in China and elsewhere to meet the steep demand because of the coronavirus. Like Medtronic, the Maplewood-based company also has donated masks and other health care supplies.

Visit the Star Tribune (Minneapolis) at www.startribune.com


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