Coronavirus hits the floorcovering industry, China production takes economic hit

Contributed photo / Shaw Industries' Plant 44/64 in Ringgold was converted from rug manufacturing into a luxury vinyl tile plant.
Contributed photo / Shaw Industries' Plant 44/64 in Ringgold was converted from rug manufacturing into a luxury vinyl tile plant.

The growing coronavirus threat has yet to spread into Tennessee, Georgia or Alabama with any confirmed cases, but the virus is threatening the health of some local businesses as it restricts travel and production in some key Chinese factories.

The plunge in the stock market Monday shed more than $1 billion of market value from publicly traded companies headquartered in the Chattanooga area and could, if it worsens, force a key local industry to hit the floor.

The floorcovering industry based in Dalton, Georgia, gets nearly one fourth of its $24 billion of annual product from China, but factory slowdowns in China, if sustained, could threaten the supply chain for the industry. If the coronavirus continues to worsen, available inventories of luxury vinyl tile and other materials could be threatened once the current three-month supply runs out.

Billionaire Warren Buffett, whose Berkshire Hathaway owns the world's biggest carpet company, Shaw Industries, said Monday the viral outbreak in China has slowed economic growth and advised that a "very significant percentage of business" will be impacted by the effects of the coronavirus. In an interview on CNBC's "Squawk Box," Buffett highlighted Apple, Dairy Queen and Shaw Industries among the vulnerable businesses he has invested in that could suffer from a China production slowdown.

Many of Berkshire's roughly 1,000 Dairy Queen stores in China are closed and many of Berkshire's other companies are suffering supply chain problems.

But Buffett said such businesses are being affected by a lot of other things, too, and he said he remains confident in the market long term.

photo AP Photo/Nati Harnik / Investor Warren Buffett

"They'll have ups and downs," he said. "That's good for us actually - we're a net buyer of stocks over time."

"Who wouldn't rather buy at a lower price than a higher price?" Buffett continued. "People are really strange on that. They should want the stock market to go down - they should want to buy at a lower price."

Kemp Harr, publisher of Floor Focus magazine, said "there is a minimum of a 90-day inventory here" of most floorcovering products "so we'll have to wait and see what happens."

Nearly 90% of the clickable luxury vinyl tile flooring is now produced in China and could be most affected by any continued slowdown.

In the United States, there are only 14 confirmed cases of coronavirus illnesses, according to the U.S. Centers for Disease Control and Prevention.

The virus was first detected in the central China city of Wuhan in December.

Dr. Paul Hendricks, Hamilton County health officer, told members of the Regional Health Council during a briefing this month that officials are walking the "narrow line" between making people aware of the new virus and assuring them that their risk of contracting the illness in the United States is low. Hendricks said influenza virus is a much bigger threat locally.

"If you're worried about [coronavirus], you haven't gotten your flu shot and aren't taking precautions to protect yourself from the flu, your priorities are a little misplaced," Hendricks said.

The U.S. public health response to coronavirus is primarily focused on detecting new cases quickly and preventing further spread. Those with a history of travel from mainland China within 14 days of symptom onset, or any person - such as a health care worker - with symptoms who was in close contact with an infected person should be tested.

Public health officials in Tennessee and Georgia said they're closely monitoring the situation and following the CDC's guidance in terms of response.

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