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Illustration: Aïda Amer/Axios

The economic fallout of the global pandemic will test the resiliency of U.S. automakers, who vowed after going bankrupt a decade ago that they would be prepared for the next downturn.

Why it matters: No one is suggesting the coronavirus means a repeat of 2009's bleak days, when the U.S. auto industry was on the verge of collapse and needed a taxpayer bailout to survive.

  • But what began in late January as an issue for auto supply chains in China now threatens vehicle demand around the globe, writes Bloomberg, citing RBC Capital Markets.
  • Morgan Stanley analyst Adam Jonas is even suggesting the U.S. should bring back the hugely popular "Cash for Clunkers" rebate program that propped up car sales during the Great Recession.

The state of play: It could be a month or two before parts shortages that began in China ripple through supply chains and potentially interrupt U.S. auto production, industry experts say.

  • Many components were already en route to carmakers and suppliers ahead of the Chinese New Year, before the coronavirus threat extended the holiday shutdown.
  • Carmakers are using workarounds, like airfreight or alternative suppliers, whenever possible.
  • “There are bubbles that haven’t shown up yet,” said Dan Hearsch, a managing director at consulting firm AlixPartners.
  • Later this month, for example, there's likely to be a shortage of memory chips from South Korea, says Oliver Wyman consultant Andrew Chien.

The catch: “You need every part to make a car,” says AlixPartners' Mark Wakefield, which means production could be interrupted.

Another problem could be weakening consumer demand: People who are working from home and avoiding airports, conferences and sporting events aren't likely to visit a dealership to buy a new car amid the coronavirus outbreak.

  • Auto sales plummeted 80% last month in China and could fall by as much as half in the U.S. and parts of Europe over the next several months, RBC estimates.
  • Jonas now expects a 9% sales decline for the year. Before the outbreak, he had expected a decline of 1-2%.
  • Analysts are ripping up previous forecasts, with most now predicting sales around 15.5 million vehicles, down from a recent trend of 17 million.

Even if the virus gets much worse, however, sales aren't likely to plunge to the depths of the 2009 crisis, when the industry sold just 10.4 million units.

  • General Motors and Chrysler needed a taxpayer bailout in 2009, and Ford barely squeaked by with a well-timed loan.

The industry is generally healthier today than it was back then.

  • At GM, for example, CEO Mary Barra spent years shedding unprofitable assets and has vowed to maintain a "fortress balance sheet" to withstand a severe downturn.
  • Ford, which is in the midst of an $11 billion restructuring, is in a tougher spot, and some credit rating agencies have downgraded the company's debt. But Ford had $22.3 billion in cash at the end of 2019, and could cut its $2.4 billion shareholder dividend if necessary to power through the worst of the storm.

The bottom line: Detroit's long era of prosperity is about to be upended.

Editor's note: This story has been updated to include further comments from Adam Jonas.

Go deeper

Mike Allen, author of AM
8 hours ago - Politics & Policy

Biden adviser Cedric Richmond sees first-term progress on reparations

Illustration: "Axios on HBO"

White House senior adviser Cedric Richmond told "Axios on HBO" that it's "doable" for President Biden to make first-term progress on breaking down barriers for people of color, while Congress studies reparations for slavery.

Why it matters: Biden said on the campaign trail that he supports creation of a commission to study and develop proposals for reparations — direct payments for African-Americans.

Cyber CEO: Next war will hit regular Americans online

Any future real-world conflict between the United States and an adversary like China or Russia will have direct impacts on regular Americans because of the risk of cyber attack, Kevin Mandia, CEO of cybersecurity company FireEye, tells "Axios on HBO."

What they're saying: "The next conflict where the gloves come off in cyber, the American citizen will be dragged into it, whether they want to be or not. Period."

10 hours ago - Politics & Policy

Cedric Richmond: We won't wait on GOP for "insufficient" stimulus

Top Biden adviser Cedric Richmond told "Axios on HBO" the White House believes it has bipartisan support for a stimulus bill outside the Beltway.

  • "If our choice is to wait and go bipartisan with an insufficient package, we are not going to do that."

The big picture: The bill will likely undergo an overhaul in the Senate after House Democrats narrowly passed a stimulus bill this weekend, reports Axios' Kadia Goba.