By Sheena Lee
The disaster caused by Japan’s earthquake and tsunami risks affecting automakers in the US and elsewhere as well as in Japan as companies shut down manufacturing plants amid supply chain disruptions and uncertainty over the country’s crippled nuclear plant.
Analysts are most worried for names like Toyota (TM), Japan’s largest carmaker, Nissan (NSANY.PK), and Honda (HMC), which have all had to close down major manufacturing facilities due to the disaster.
“From all the things we’re gathering, including memos from Japanese companies … the potential impact of the tragedy is a bigger deal” than they are portraying, said Jesse Toprak, analyst at auto researcher TrueCar.com.
For now, Toyota has suspended overtime production at its North American plants, which get about 20% of their components from suppliers in Japan.
Toyota may lose output of at least 40,000 vehicles, according to Bloomberg News, and prices could rise — or incentives will fall — for imported models that may be in short supply, said Toprak. ”The biggest unknown is the potential shortage of parts produced in Japan for vehicles made elsewhere.”
Nissan’s highly sought-after all-electric Leaf, and its Quest family van, could be hit as well if production is out for more than a few weeks, according to Edmunds.com. Nissan spokesman Brian Brockman said a shipment of 600 brand new Leafs set sail for the US just prior to the earthquake, but a key pier that Nissan uses for exports was then swamped by the tsunami and more than 2,300 vehicles were destroyed.
Honda, the nation’s third-largest carmaker, estimated that they will reduce production for 16,600 cars and trucks and 2,000 two-wheelers, said Tomoko Takamori, a spokeswoman for the Tokyo-based company.
The automaker also said about 30% of the company’s 110 suppliers for its four- and two-wheeled vehicles based in the quake-hit area are finding it hard to resume operations anytime soon, according to The Wall Street Journal.
Honda’s manufacturing facility in the Mexico’s Jalisco state has also been suspended as the plant experiences low auto parts inventories due to the earthquake. The company has lowered its revenues guidance for the full fiscal 2011 based on lower outlook for unit sales in all the segments, wrote Zacks analysts.
Disruptions in the supply of Japanese components eventually would also affect Japanese-owned plants in the United States, known as transplants, said Itay Michaeli, an analyst at Citi Investment & Research Analysis. ”This is the notable risk to the U.S. industry,” he said.
General Motors (GM) became the first U.S. auto maker to close a factory because of the crisis in Japan. The automaker said it is halting some production at its Buffalo, N.Y., engine plant, and plans to idle a Shreveport, La., plant that builds small pickup trucks. GM cited short supplies for a Japan-made part it didn’t identify and didn’t say when it expected to restart production, said the Journal. GM is also temporarily laying off 59 of the 623 workers at the Tonawanda Engine Plant.
“The industry doesn’t know what’s going to happen next when you have a massive supply disruption like that out of Japan,” said Mark Reuss, General Motors’ North American president. “We’re going to be tested.”
But Moody’s says that US automakers could gain market share in the wake of the Japan disaster: “Given the Japanese manufacturers’ greater vulnerability to the Japanese supply chain, US automakers could gain modest market share, a credit positive.”
Toyota, Nissan, and Honda said car production in China was unaffected after the earthquake. CLSA Asia Pacific Beijing-based analyst Scott Laprise wrote in a note to clients: “Our past experience tells us the Japanese joint ventures in China keep little inventory to improve overall efficiency…This changed last year after the Honda parts factory went on strike.”
Source: Alacra Pulse, Detroit Free Press, Bloomberg, Wall Street Journal, The Street, Car Trade India, The Detroit News, AFP, USA Today, Zacks, Associated Press.
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