Parts shortages triggered by the earthquake and tsunami in Japan could reduce global automobile production by up to 30 percent, research firm IHS Automotive told Bloomberg. Or at least that’s what Bloomberg heard.
Michael Robinet, vice president of IHS says that if parts plants affected by the quake don’t return to operation within six weeks (they might not), global auto output may drop as much as 100,000 vehicles a day. The industry produces 280,000 to 300,000 vehicles daily, he said. That number is correct, assuming the standard 260 work days a year.
“Most vehicle manufacturers will be affected by this,” Robinet told Bloomberg. “It will be very difficult for any major automaker to escape this disaster.” That is also correct.
About 13 percent of global auto industry production is down right now and production of about 320,000 vehicles has been lost, mostly in Japan, Robinet said according to Bloomberg. True.
According to Robinet, auto executives are cautious about forecasting lost production. They seek other sources for parts. “If solutions aren’t found soon, most major automakers will experience disruptions by mid-April because supply networks are intertwined.” Very true.
According to HIS, the third week of April could be the start of severe production slowdowns. TTAC had projected the April/May timeframe early on. Morgan Stanley agrees.
By then, the industry may have lost 1.2 million to 1.8 million vehicles, and will lose almost 3 million units within eight weeks. IHS estimates about half of the losses coming from assembly plants outside of Japan. Absolutely possible.
“We could lose up to 5 million vehicles in a worst-case scenario,” Robinet said. “This will affect income for the entire year if this continues for an extended period of time.” Also true.
What is not right is Bloomberg’s math. By using the 5 million worst case number, IHS figures that in the course of the year, either the Japanese suppliers will get back on their feet, or the worldwide producers will have found other sources. The world produced 77.6 million vehicles last year. A loss of 5 million would be a serious loss of 6.4 percent. But not a loss of 30 percent.
6.4 percent would be bad enough.
Oy vey Bertel. The 30% cut is to daily production. Not 30% of annual production.
True. The question is for how long. This coming week, pretty much 100% of the Japanese production could be down.
Hyundai was barely effected, The only Japanese parts used are an alternator for the Lambda V6 and an automatic transmission for the Veracruz. There’s an interesting article in Bloomberg about how there could be new opportunities for Korea suppliers:
http://www.bloomberg.com/news/2011-03-24/japan-energy-woes-yield-opportunities-for-bhp-hyundai-mobis.html
The Koreans and Europeans are likely to get some advantage, if only temporary, from Japan’s woes. I think we will see some modest market share shifts, but not a wholesale industry plunge.
In the electronics industry we are also waiting to see what shoes drop. While good companies are being proactive and pulling in materials to cover months of demand, there will be things that fall through the cracks and cause shortages in upcomning weeks and months. Especially up the supply chain to specialized materials and low visibility stuff.
Except that these *good companies* when being proactive and stockpiling materials beyond what they need, they inadvertently make the situation worse elsewhere. good for them, but bad for automotive.
Here’s one I didn’t expect.
According to the Wall Street Journal, “Ford said it is limiting production of some trucks, SUVs and cars in “tuxedo black” and other hues due to shortages of some pigments made in Japan. Production of certain red vehicles also will be limited at the Kentucky truck, Michigan assembly, Ohio truck and Twin Cities truck plants. The change will not affect the number of vehicles Ford is able to build, and only affects the colors of vehicles the company is planning to produce.”
US built Tundras or Tacomas anyone?
http://www.reuters.com/article/2011/03/24/toyota-texas-idUSN2411597120110324
so that means used car prices will rise or atleast holding up.
aaww. this just sucks for GM, in a way. GM globally outsold Toyota by at least 100K cars for the first two months of this year. If the sales pace continues through the rest of the year GM would have sold about half a million more cars in 2011 than toyota.
If GM outsells toyota this year (which I have no doubt they would have acheived by their own merit earthquake or not) they will not get any credit for doing so.
You think this will affect oil prices?
It already has in some sense – the effects of disaster were to destroy a significant portion of oil demand from Japan, incidentally just as the oil from Libya left the market. The flip side is that with rebuilding and the nuclear portion of the powergrid in the North offline for who knows how long, Japan will probably end up needing more oil. So basically, nobody knows for sure because the demand issues works in both directions.
The effects of this disaster on the global economy have yet to really be felt. Heck, the disaster isn’t even really over yet – the effects on Japan in a longer term are unknown. I just hope they can get resources to people who still need them in affected areas, and get the reactors under control so they aren’t spewing radioactive water, steam and whatever other junk gets mixed in.
Too bad GM won’t be bold enough to use the lack of parts as an excuse to close excess, profit-draining capacity at Opel.
Is that person standing next to some kind of stretched limo Toyota bB?
I used to think that Murilee Martin’s posts from the boneyards were the most depressing thing, these pix from Japan truly are. Hopefully, they can get on their feet again soon.
Many folks are worried about supplies for the automotive processes. I think that this prolonged event will force the major companies to find other suppliers posthaste. It’s hard to say how this will effect Japan in the long run.