Dive Brief:
- PPG temporarily shut down six of its facilities last month as ongoing lockdowns in China prompted logistical and operational challenges, the company said in a Q1 earnings call.
- The paint and coatings supplier operates manufacturing plants in cities including Shanghai, Suzhou and Kunshan, which have faced strict COVID-19 restrictions in recent weeks. Up to five of PPG's smaller manufacturing sites, as well as its principal Protective & Marine Coatings production facility, were mandated to lock down earlier this spring, CEO Michael McGarry said on the call.
- All of PPG's manufacturing facilities have since been approved by authorities to reopen in the region and are operating "per local pandemic management policies and the customer demand requirements," according to an emailed statement from the company to Supply Chain Dive. The company would not comment on whether its facilities were running at full capacity.
Dive Insight:
PPG, which produces automotive coatings as one of its major businesses, is one of many foreign companies tied to China's automotive industry. Automotive manufacturing and suppliers in the Shanghai region are among those prioritized by authorities for reopening on a government "white list"; authorities claim that 80% of companies on the government's initial list have resumed production as of April 29.
Senior Vice President and CFO Vince Morales noted that he expects lockdown measures to ease throughout May. Shanghai at large, however, remains largely immobilized, with most residents still confined to their housing compounds and public transit shuttered, according to state media.
Many companies in China are only able to resume production in the region now under a "closed loop" system, in which employees' movements are restricted to the factory campus and designated living areas, in an attempt to limit their exposure to the virus. PPG would not comment on if their factories are using such a system.
Despite the continued uncertainty as manufacturing inches back to normality, Morales said that PPG expects supply to "normalize for the balance of the year." The company has struggled with supply in recent months, opting late last year to diversify its resin suppliers and ramp up in-house production as it faced rising utility costs and high raw material prices.
PPG is still facing "certain raw material shortages" in several of its businesses outside China, including its aerospace and automotive refinish units, growing the company's overall sales backlog to about $180 million. Morales noted supply has improved in the U.S. and Europe — although it's still too soon to tell what the supply situation will be over the next few quarters.
"We do feel there is enough structural supplier capacity to easily satisfy global coatings demand," he said.
