Japan’s automaker hold up will spread, report says

Japanese automakers are just one of the industries exaggerated by the earthquake and tsunami that strike the island nation this month, potentially leading to longer waits for some new car buyers. But a new study says the prospect of an auto parts provide trouble could have even more far-reaching implication.

In its Global Auto Report released Tuesday, Scotia Economics notes that Japanese vehicle production shutdowns in the two weeks next the crippling natural disasters that struck off the country’s northeast coast on March 11 have amounted to a increasing loss of almost 400,000 units, or approximately 14 per cent of global output.

Although few of Japan’s car assembly plants were directly exaggerated by the quake or tsunami, they have been restricted by the subsequent countrywide water shortages and rotating power outages. And while the country struggles to cope with the overwhelming aftermath of the twin disasters, including the ongoing disaster at a damaged nuclear power plant, experts believe it could be late summer before Japan’s automakers can kick back into gear.
Even then, it could be several weeks, if not months, before the new run of parts are graceful through the supply chain again.

Considering that Japanese automakers create 1.3 vehicles outside Japan for every one they manufacture domestically, the report warns that as the closures spread, the impact on the global industry could be harsh.

Already the effects are waving around the world, as shortages of key automotive parts have spread from Japan and caused, for example, Toyota to halt overtime operations at its 14 North America plants.

Scotia Economics Senior Economist Carlos Gomes says a domino effect is inevitable considering that Japan is both the world’s second-largest vehicle manufacturer and second-largest auto parts exporter, with many of those suppliers located in the stricken northeastern region of Japan.

“The major risk to the global auto industry, including non-Japanese automakers, lies in the potential for auto parts shortages globally and its impact on the global supply chain, due to delays in the resumption of component deliveries by Japanese suppliers,” Gomes said in a statement.

Besides electronic components, Gomes points out that other components sourced from the region can’t be found anywhere else.
Supplies of a shiny, patented pigment called Xirallic, for example, are running short due to damage at the one plant that produces it. As a result, Ford and Chrysler have already announced they will stop offering certain shades of paint to new car buyers.

The North American automobile industry should climate the storm better than some other markets, however, as 80 per cent of the approximately 3,000 parts used to bring together the average vehicle in Canada and the U.S. are made domestically.

In its place, the report warns that the crash will be the greatest in Asia, with Thailand pinnacle the list.

“In fact, Japan accounts for more than 57 per cent of all auto parts destined to Thailand a nation that shaped 1.6 million cars and trucks last year, a level rapidly prospect the 2 million units assembled in Canada last year,” Scotia Economics wrote in a statement proclaiming the report.

Taiwan, the Philippines and China also source more 40 per cent of their total auto parts imports from Japan.
Because modern vehicle meeting has largely shifted to a just-in-time parts delivery model, the degree of the belongings will depend on how many parts each manufacturer has in store.

The lack of new shipments should come out by mid-April, after the slow-moving cargo vessels shipping the last pre-quake supplies have arrived at their purposed.

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