Japan crisis hits the entire automotive industry image

Parts shortages caused by Japan’s enormous earthquake may reduce global automobile production by up to 40 per cent, research firm IHS Automotive said Thursday.

That would be an enormous cut, equivalent to production levels at the depth of the credit crisis and recession in late 2008 and early 2009.

Given the wide use of Japanese-manufactured parts in a large portion of the vehicles produced worldwide, this disaster has rocked the automotive sector to its core, and delays associated with the devastation just keep piling up.

Prior to the global economic collapse, the sector already had crashed and automakers were scrambling to recover from significant problems that had plagued the sector for years.

According to the same study, a drop in output of up to 100,000 vehicles per day was possible if major supply disruptions out of Japan persist for up to eight weeks after the March 11 earthquake. The analyst also detailed substantial production losses in North America and Europe, while in India and South-east Asia the close links of Toyota, Honda and Nissan plants with Japanese supply would “likely compromise volume by late March”.
Citigroup warned investors this week that a genuine recovery in automobile production will likely be pushed back to at least the fall of this year.

The Wall Street Journal reported Wednesday that Toyota Motor TM has told its North American employees that North American production will have some shutdowns, but the timing, extent, and models affected are not known.

Also, General Motors Co temporarily suspended some production at its Buffalo, New York engine plant due to a shortage of parts from Japan. The parts are the same ones causing General Motors to lay off 880 hourly workers at Shreveport’s plant.

Fors Motor Co said that the company hasn’t had any disruptions yet, but the automaker told dealers to stop taking orders for vehicles painted in tuxedo black and will limit output of automobiles in three red shades because of a shortage of a necessary pigment.
In the meantime, Volkswagen AG, PSA Peugeot Citroen and other European automakers may be forced to halt production in coming weeks as component suppliers in earthquake-ravaged Japan struggle to restart factories. VW, Europe’s largest carmaker, already dropped some shifts at the main plant in Wolfsburg in January due to parts shortages.

With earnings certain to take a hit and Japanese transport sector stocks slumping 11 percent since the disaster, automakers are reluctant to forecast how long the stoppages could last, saying only that a near-term solution is elusive.