Factories fire up in Europe to pull economy back from the abyss

The restart is crucial as Covid shutdowns have forced govts to pledge hundreds of billions of fiscal measures

BERLIN • Volkswagen AG is rebooting plants, Airbus SE is up and running, and UK builders will soon be erecting homes again as Europe starts returning to work after coronavirus shutdowns plunged the region into its worst economic slump in living memory.

Factory doors are reopening after nations from Denmark to Germany began easing restrictions on public life, with Italy, France and Spain to follow. But it won’t be a sudden return to business as usual. Companies will have to implement social distancing and hygiene measures to keep workers safe, after the pandemic claimed more than 110,000 lives in the region.

The restart is crucial to pull the European economy out of a tailspin that’s forced governments to pledge hundreds of billions of euros to keep companies afloat. Measures of private-sector business activity plummeted to an all-time low in April, with record job cuts. Even in Germany, the nation that may weather the crisis best, business sentiment is “catastrophic”, according to the Ifo Institute for Economic Research.

But while shutting down factories is relatively easy, ramping them up again is more complicated because even small kinks in the supply chain can cause major disruptions, said Michael Groemling, an analyst at the Cologne-based German Economic Institute.

“What complicates matters even more is that no one knows for sure how demand in the key markets in Europe and the US will shape up in the coming months,” Groemling said by phone.

PSA Group, for one, isn’t saying when it will reopen European factories. The maker of Peugeot, Citroen and Opel automobiles said there’s no point in building up inventories while sales are dormant. “It’s important to have dealership and sales activity before we push the button,” chief financial officer Philippe de Rovira told analysts.

While the extent of the reboot differs by country (Portugal, for example, has allowed most factories to keep running throughout the crisis), it’s happening gradually. Moving

too quickly, or carelessly, risks contributing to a second wave of infections that would turn the recovery effort on its head. And some segments of the economy — think bars and restaurants, air travel or movie-going — will probably remain disrupted for some time.

Europe’s car industry, which accounts for about 14 million jobs across the region, is eager to get back to work, even though it’s unclear whether buyers will return to showrooms once lockdowns are lifted.

Fiat Chrysler Automobiles NV, the Italian-American carmaker, will restart production at its Sevel SpA light van plant in southern Italy and resume some operations at other factories across the country

today. Ferrari NV plans to reopen its Maranello and Modena factories in northern Italy on May 4.

Volkswagen, the world’s largest automaker, resumed production of its new ID.3 electric car at a factory in Zwickau, Germany, last Thurs- day, saying it expects to start Euro-pean deliveries of the vehicle this summer as planned.

Renault SA began a gradual ramp-up in France last week, starting with three engine and parts factories and as little as a quarter of employees. It’s providing safety measures such as protective gear, temperature monitoring and extra cleaning. The company has already reopened plants in countries including Spain, Portugal, Morocco and Russia.

Most carmakers aren’t revving up all their factories at once, and those that restore output are expected to run assembly lines at slower rates until demand climbs back toward pre-crisis levels.

The UK’s largest homebuilders have drawn up plans to resume work starting this week after implementing a widespread shutdown last month in response to the outbreak. Persimmon plc will begin a phased restart from April 27 and Taylor Wimpey plc plans to resume work in May after drafting new guidelines for workers on how to maintain social distancing during construction work.

Construction materials companies including CRH plc and Marshalls plc have both furloughed workers to cope with the slow- down, but have continued to supply some customers and will gradually ramp up to meet demand.

Commercial projects including the redevelopment of the former Whiteleys shopping mall in Lon- don managed to avoid shutdowns because they could maintain social distancing with just heavy machinery and few staff on site. Projects closer to completion, like the city’s Twentytwo Bishopsgate skyscraper, had been forced to temporarily suspend work because it’s harder to keep workers apart when fitting out an almost completed office building.

In Spain, one of the countries in Europe hardest hit by the virus, most large developers, including Aedas Homes SA, have resumed construction after the government imposed a two-week lockdown at the end of March. — Bloomberg