The respiratory virus born in China is continuing to hit businesses worldwide, from travel restrictions in Beijing to a postponed trade show in Toronto, with no clear sign yet how much more it could spread or how it will impact business.
Severe Acute Respiratory Syndrome - or SARS - has affected more than 4,000 people worldwide, most in Asia, but a pocket of infection has hit Toronto, where there have been 15 deaths and 140 confirmed cases.
On April 23 the World Health Organization issued a travel advisory recommending no nonessential travel to Toronto, Beijing and the Chinese province of Shanxi, west of the Beijing, while still maintaining an existing travel recommendation for Hong Kong and China's Guangdong province. Organizers of PACex International, the Toronto packaging and material- handling show originally slated for May 6-8, have postponed the event four months.
While most manufacturers - including Singapore-based Flextronics International Ltd. - have maintained they have not seen any cases among their employees, the watchdog group China Labor Watch states at least one worker for Flextronics died of an illness, identified on a plant bulletin board as ``miliary tuberculosis.''
CLW said the 20-year-old female employee at Flextronic's Zhuhai, China, plant died and another eight have been sick. Company officials did not return calls, but during an April 24 conference call with analysts, Chief Executive Officer Michael E. Marks said the firm has had no employees contract SARS.
``We have put education programs in place at each site, and it's been so far, so good,'' he said. ``We're really not having any impact to speak of.''
Organizers of an auto show in Shanghai cut it short because of the disease. The city officially has reported a half-dozen cases, although the WHO suspects there are far more.
Underreporting in Beijing, where there are now a suspected 500 cases out of more than 2,400 nationwide, prompted the communist government to fire two top officials.
Toyota Motor Corp. is evacuating its Japanese citizens working in Beijing to avoid exposure to the disease, while most manufacturers have continued their travel bans to the region.
What is not known yet is any economic impact for the rapidly growing region.
``It remains very hard for us to get a good handle on the short-term picture for our markets, especially since Asia represents an important part of the global supply and demand story in our businesses,'' Jeff Lipton, president and CEO of Nova Chemicals Corp. said during an April 23 conference call.
Processors in China cut back on resin purchases during the first quarter of this year because of high prices, he said, so normally Nova would expect a buying boost to make up for limited material stocks in the second quarter.
``However, SARS is having an impact on commerce and confidence in Asia,'' he said. ``The disease, plus continued high and volatile energy markets, could keep both economy activity and inventory replenishment modest for a while.''
Travel restrictions are slowing ramp-up engineering and preparations for new products, said Flextronic's Marks, but the disease could, in fact, support other global operations.
In the past, the high interest in cheap manufacturing operations in China had prompted some companies to consider abandoning other regions altogether, Marks said. Limited access to some of those Asian sites, though, makes it clear that companies must have access to manufacturing in multiple sites.
``We've been saying for some time that you want to balance your global supply chain to the best of your ability,'' he said. ``With these disruptions in play, that view is getting a good reception. Putting too much of any company's business in one location or with one supplier is not a good thing to do.''
SARS probably will not slow economic growth in China for long, though, one analyst predicted. The country is a potential powerhouse economy with a large work force that is both trained and low-cost, capable of making products for a global marketplace and a growing consumer market at home.
``This is a storm that will blow past,'' predicted Desmond Wong, a partner with Ernst & Young and national director of its China group.
In fact, the outbreak is shaking up a bureaucracy that traditionally had not responded well to outside pressures. Exposure to a possible negative economic outlook from SARS has forced government leaders to realize they must respond to global concerns if they want to retain global businesses.
``The business case of going to China has not changed,'' Wong said. ``The labor force, the Western technology, the manufacturing know-how and the influence of the World Trade Organization - those are real reasons that are not going to change now.''
Meanwhile in Toronto, organizers of PACex International 2003 voted to postpone their annual conference - originally slated for early May - until September.
``Although there is little danger to the public at large from SARS, the perception ... has created a wave of [concerns] outside of Toronto that is causing a significant number of exhibitors and visitors alike to reconsider their participation at this time,'' said Alan Robinson, president and CEO of PACex.
The packaging, materials-handling and food-processing show now is set for Sept. 30-Oct. 2. About 30 percent of the exhibitors and 5 percent of the 15,000 attendees come from the United States.
SARS has not affected daily business life dramatically for manufacturers in Toronto and its suburbs so far, noted Molly Fitzpatrick, director of marketing and planning for Decoma International Inc. of Concord, Ontario.
``It's business as usual,'' she said during a telephone interview shortly after the WHO warning was posted. ``We've got customers up here today, and nothing has seemed to be a problem.''
Bumper specialist Automotive Components Systems Technologies Inc. has not limited travel between its corporate office in Southfield, Mich., and manufacturing operations in Oshawa, Ontario, which is just east of Toronto. Nor has it restricted business trips elsewhere.
Phil Fioravante, vice president of sales and marketing development will be attending auto supplier conferences in Asia next month.
But there have been increased concerns regarding travel between the United States and Canada's largest city.
The U.S. Centers for Disease Control and Prevention has recommended visitors to Toronto take extra precautions to avoid hospitals and other areas near outbreak centers. Despite protests from Canadian officials that Toronto is safe, WHO is concerned about suspected cases of SARS spreading from visitors from Toronto to the United States, the Philippines and Australia.
