Coronavirus outbreak: Philadelphia-area businesses are beginning to feel the sting
“The real question is how long will it last and how bad is it going to be," an expert said.
About 40 Chinese motorcycle enthusiasts fly to Pennsylvania every August to spend two weeks riding iconic Harley Davidsons through the rolling hills of the Keystone State.
The Knighthawk Tours and Experience USA Tours — operated by U-Combination Technology of Wayne for more than a decade — often result in the sales of dozens of Harley hogs. As tourists “experience authentic American riding culture,” they spend tens of thousands of dollars on merchandise along the route. One year, the group dropped more than $40,000 in less than 40 minutes at the luxury jeweler Tiffany & Co. in King of Prussia, according to organizer Jeff Ji.
It’s unlikely to happen this year.
“We’ve put a hold on the August trip until further notice,” Ji said, because of current travel restrictions and the uncertainty brought on by the coronavirus, which is thought to have emerged at a live-animal market in Wuhan, a city of 11 million in China. “We don’t know if the outbreak will be prolonged or temporary. Our customers cannot set aside time for their vacations.”
Ji, who also recruits Chinese students to attend American universities, has had to postpone or reschedule other trips to China. A March 6 conference has already been canceled. “The economic impact has been huge,” he said.
Local manufacturers who supply the Chinese market are concerned — but not excessively worried — about how the coronavirus will disrupt their businesses. “Is it hitting our bottom line? Not yet,” said Kareem Afzal, vice president of Warminster’s PDC Machines Inc., which produces compressors and other equipment for industrial gas and renewable energy companies.
Equipment, however, is sitting idle. “Our customers are not taking delivery because nothing is being shipped into the country,” said Afzal. About 20 percent of PDC’s trade is with China.
Most commercial flights and cargo flights into the nation have been halted. By government decree, the 10-day Lunar New Year holiday has been extended through Feb. 8 in some parts of China, but few people are celebrating.
“The whole country is effectively in lockdown,” Afzal said. “Our office manager in Shanghai is sitting at home and watching TV together with his family.”
Some local businesses are placing early orders for key components they can source only from China. Sunhillo Corp. of West Berlin, Camden County, manufactures high-tech equipment that interfaces with radar for air traffic control systems.
“We’re trying to take proactive measures so it doesn’t hit our bottom line,” said Dave Whitman, Sunhillo’s CEO. “I’ve ordered extra inventory. If I can’t get them I can’t build my equipment. We usually order six months out, now I’m ordering a year out because who knows what will happen in three months.”
Whitman said many of the traveling business reps he trades with in Europe are less concerned with contracting the virus itself. “They fear they could be quarantined on returning to their own countries," he said. "They don’t want to run the risk of being in quarantine for a week or more.”
Dominic Rawson was in China in December as managing director for Fort Washington’s R&M International Sales Corp., a multinational company that produces textiles and plastics for a global market.
“I think the economic impact will be felt worldwide,” Rawson said. Wuhan is a major automotive center, and R&M provides mass quantities of plastics for that industry. Automotive has had a general slowdown worldwide — about 30 percent — since October, less so in the U.S., but certainly in Asia and Europe.
Rawson is confident that trade will continue, even if it slows. American manufacturers may feel pain if they can’t get deliveries from China and there may be delays in shipments from China because companies may run out of raw materials or employees may not show up to work. “One factory affected by the virus could create a domino effect.”
Jacques deLisle is director for the Center of the Study of Contemporary China at the University of Pennsylvania.
“The real question is how long will it last and how bad is it going to be," deLisle said.
The Chinese economy has taken a “huge” unexpected hit, deLisle said. The lunar new year usually is occasion for people to travel across the country and abroad. The holiday is similar to Christmas, with consumer gift giving and consumption that drives the year’s biggest spending period. Not this year, however. The outbreak left high streets and shopping centers deserted.
Apple and Starbucks shuttered the majority of their retail outlets during the last week. Many tech-related companies ordered their employees to work from home.
The Chinese economy is already under pressure, with some suppliers moving to less expensive labor markets. “This could accelerate that emerging trend, which is already being driven by rising costs, growing competitiveness throughout Southeast Asia and growing fears about the U.S.-China trade war,” deLisle said.
The coronavirus has been compared to the SARS outbreak of 2003. “But the good news is that this is less devastating, with a lower mortality rate,” deLisle said. “China and the world have responded more aggressively this time.”
If the outbreak isn’t under control before March or April, the supply chains that feed American manufacturers could shudder and slow.
The bad news: The Chinese economy is four times larger than it was in 2003. It is much more integrated with the global economy. Americans used to only buy things from China. Now America sells more products to China. If their marketplaces dry up, so do opportunities for American business.
Medical facilities in China are overflowing with patients in a nation where hospitals provide a large amount of primary care. Though the government claims to have built a new hospital from scratch in 10 days, deLisle said there are more basic needs going unmet.
There’s a lack of protective gear for medical personnel. Face masks and so-called moon suits are in short supply. “If those personnel are not protected adequately, they become vectors for spreading the disease.”
“It’s a good time to own stock in medical face mask companies,” he quipped.