Japan Earthquake Impacting U.S. Auto Production and Deliveries

Fearing that last week’s earthquake and tsunami will lead to a shortage of parts, Japanese automakers have scaled back production in North America.

Toyota’s North American manufacturing and engineering operations spokesman Mike Gross said about 20 percent of its components are manufactured in Japan. Gross said the company’s Tier 1 suppliers in Japan are not a concern, but the operational status of Tier 2 and Tier 3 sources is still being evaluated.

About 30 percent of Japan-based Fuji Heavy Industries Ltd.’s suppliers were damaged by the quake and tsunami. Fuji is the parent company of Subaru Corporation and supplies transmissions for the six-cylinder Legacy, Outback and Tribeca models.

Subaru of Indiana Automotive Inc. executive vice president Tom Easterday said, “We just don’t know yet what impact we will see.  Right now, it’s production as usual, but it takes about a week for the parts flow to reach us from Japan. So it will be next week before we see any effect.”

He said the damage to Fuji’s Japan plants has been characterized as “minor” but noted that it could take a long time for suppliers to recalibrate their parts making machinery.

HIS Global Insight analyst Paul Newton warned, “Several of the affected component plants supply automakers’ facilities around the world with systems and components that may not easily be shifted to other manufacturing locations.”

“The ripple effect of the stoppages to supply and production in Japan,” said Newton, “will be felt in many parts of the world, including the United States, China, and Europe, as many key parts and technology are exported to global operations from Japan.”

He also called reports of possible shut downs at Toyota’s Hokkiado and Tohoku facilities “worrying”. The Tohoku plant is one of Panasonic’s major battery pack production facilities. Also of concern, are reports of damage suffered by a number of electronic component suppliers.

Newton said, “The process of rebuilding the supply capability of these types of facilities is not a matter of days or a couple of weeks but will be evaluated on a case-by-case basis.”

Shutdowns have already caused the delay of deliveries to some U.S. retailers, and Nissan has warned of possible delayed shipments of its GT-R, 370Z and Leaf models. Deliveries of Lexus and Infiniti models are also expected to be delayed. Toyota has announced that its Prius assembly plant is operating, but that parts delays and shipping bottlenecks could result in delays in deliveries to the North American market.

It’s not just Japanese automakers feeling the impact of the 8.9 magnitude earthquake and tsunami. Ford Motor Company is concerned about possible interruptions in its hybrid battery supply chain. Japan-based Sanyo Corporation builds the hybrid batteries used by Ford. Ford spokesman Todd Nissen said, “We have not had any supply disruptions at this point, but like the rest of the supply base, Sanyo is continuing to assess the situation.” General Motors Company and Chrysler Group LLC said their production pipelines have not yet been affected by the disaster.

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