CVG (NASDAQ: CVGI) announced that it has restarted operations at its Shanghai plant in China on Thursday. In March, the company became one of the thousands of manufacturers in the region that were forced to halt production as the result of restrictions aimed at stemming the spread of COVID-19.
Production at the Shanghai plant resumed on May 20 at 50% capacity under a “closed-loop” system — where employees must receive a negative COVID test and then live on-site within the factory — to minimize the risk of spreading the virus within the city.
CVG plans to continue ramping up production over the next few weeks in accordance with the local lifting of restrictions, led by Deputy Mayor of Shanghai Zong Ming, who has stated that the city hopes to open in June fully.
The shutdown in March immediately impacted CVG’s OE seating customers in Asia and abroad, who were either facing similar manufacturing restrictions or unable to ship and receive products due to congestion in Shanghai’s port, which is the largest port in the world. CVG responded quickly, moving to air shipping to limit supply chain disruptions for its customers. The company was recently able to reinstate ocean freight through both the Shanghai and Ningbo ports.
“We may not have control over this pandemic or the delays in production it causes, but we can adapt quickly and create alternate solutions to mitigate the impacts,” said CVG President and CEO Harold Bevis. “We’ve had our customers’ needs front-of-mind in every decision we’ve made — from providing alternate means of shipping to working closely with some of our top customers to mirror production in our Thailand and Mexico operations in order to provide alternate supply.”
CVG’s local seat production in Asia includes manufacturing medium- and heavy-duty seating solutions for some of the region’s largest vehicle manufacturers and represents an $80 million accretive business for the company. Globally, seat-part supply from Shanghai impacts $170 million worth of production for the company within the U.S., Mexico, UK, Thailand, and Australia.
In combination with the war in Ukraine, which immediately impacted production at the company’s facility in L’viv, CVG faced first-quarter interruptions that continued into the second quarter. CVG actively resolves these setbacks and expects second-half operations to be back to pre-war, pre-COVID status, barring any unforeseen events.
