Japan Disaster Breaks Auto Supply Chain     Print Email

The triple disaster in Japan: earthquake, tsunami and nuclear crisis has brought the country's auto industry to a virtual halt. The world's biggest automaker, Toyota, says it is extending the shutdown of its factories in Japan, and Honda is doing the same. Nissan resumed operations at some plants last week, but says it will continue only as long as their parts inventory will last. Companies are struggling with power cuts and a shortage of parts. Even the Swedish carmaker Volvo and Detroit's General Motors have both stopped some production because of a shortage of parts.

Here is an interview by NPR's Sonari Glinton exploring how the crisis in Japan is affecting the auto industry:

 

SONARI GLINTON: When people talk about the economic effects of the earthquake and tsunami in Japan, they often use the words "supply chain": two simple words to explain something that is incredibly complex.

Ms. TRACY HANDLER (Senior Analyst, IHS Automotive): When you build a car, there are thousands of parts going into building that car. And when you get to the final assembly, you have parts that have come from all over the world.

GLINTON: This is valid from the rubber used, to the plastics, the electronics, the precious metals that go into the microchips, the iron ore that's mined and then turned into steel and so on. The supply chain though isn't just the stuff they put in the cars; it's how it all moves. The supply chain process includes shipping, air freight, trains, trucks; all the different shipping channels that would move parts from one place to another. So what's happens when one piece of that chain is gone?

Ms. HANDLER: You end up with nothing. In order to build a car, you have to have every piece. There is not one piece that you can say "well, I'll add that later."

GLINTON: Not one piece. But there are factories all over the world making car parts.

Ms. HANDLER: If you have a part that is not being made due to a factory being down, you can't just go to the factory next door and say "hey! can you make this widget?"

GLINTON: Well, why not?

Ms. HANDLER: Because of the complexity of the product that goes into a car and its validation (so much of it being safety related), tooling can't just be switched from one person to another.

GLINTON: So, Ms Handler, you say  it would take anywhere from six weeks to six months for a car manufacturer to change suppliers from one part of the world to another. So far, none of the automakers have been willing to make those changes until they know exactly how their suppliers in Japan are affected. But let's check in on the last link in the supply chain.

Mr. GEORGE GLASSMAN (Owner, Glassman Auto Group): We're standing in the parking lot. There's nothing but cars and sunshine and hopefully and a lot of buyers. Having an ample supply of vehicles or having the right supply, regardless of the time of year is always a fine balance. So, right now I'd say we're fine, but in terms of how that will change from day to day, I can't be more overly concerned about the situation, until I know more.

GLINTON: Every car company, both foreign and domestic, is trying to come up with that information. They all say they're continuously studying their supply chains. That means they're accounting for thousands, if not millions of individual parts. And, as Tracy Handler says, because of the fluidity of the situation in Japan, we may not find out what part is missing until the time comes to put it on a car.

Sonari Glinton, NPR News.