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Japan Quake Impacts Vehicle Production, Shipping and Supply

Benjamin Hunting
by Benjamin Hunting
March 15, 2011

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The severe earthquake and tsunami that hit Japan this past week has caused chaos and suffering on a huge scale, even in a country that was well prepared for exactly this type of natural disaster. It is a testament to the level of safety planning at all levels of society that the number of people lost during the catastrophe has remained lower than in other recent tsunami events that have occurred elsewhere around the globe. In addition to the tragic human toll, there is a huge economic price to pay as a result of the quake, and it is difficult to find a segment of Japanese industry which hasn't been affected - including the country's long list of automakers.

While the rest of the world has been spared the physical destruction and loss of life associated with the Japanese quake, an economic wave has begun to sweep across the globe as the country's ravaged industrial base begins to take stock of its situation. For several Japanese car companies, the earthquake has caused a complete suspension of vehicle production. According to a report in Forbes, five of the country's largest automakers have decided to shut down production lines at least in the short term, in many cases due to the proximity of major factories to the most affected earthquake areas. Toyota will not resume activities until March 16 at the earliest, while Nissan (March 18), Mazda (March 20), Honda (March 20) and Subaru (March 21) are facing an even longer idle period. Suzuki also elected to keep its plants shuttered until March 17, but Mitsubishi has resumed production after a brief shutdown of its own.

There are a number of factors keeping Japanese automakers from resuming a regular schedule. Concern for employee safety and a severely damaged infrastructure in important industrial areas have played a large role in keeping workers at home. Also at play are production facilities which did not emerge unscathed from the quake, rolling blackouts introduced as the result of the beating taken by the country's power grid and the difficulty that has been encountered by suppliers trying to logistically coordinate the delivery of important parts and supplies to ravaged areas of the country.

In addition to the problems that have been encountered on the production side by Japanese car companies after the earthquake, some automakers have also been hit with a huge destruction of inventory. Nissan in particular saw 2,300 automobiles completely wiped out by tsunami waters, with more than half of those vehicles representing the company's Infiniti luxury brand. 1,300 of the damaged models were intended for export to the United States. Nissan has also delayed shipments of the revised 2012 Nissan GT-R to North America, but has stated that it expects current supply of the halo car to be able to meet demand.

These production delays and inventory losses have had a significant financial impact on Japanese automakers. Several of the major players from Japan have seen their stock prices take a beating over the course of the past several days, and an article published by MSNBC quoted a Toyota representative as stating that the company stands to lose $72 million USD in profits for every day that its facilities stay dark.

How have the effects of these mounting problems begun to manifest themselves outside of Japan? From an industry perspective, car component manufacturers around the world are already being forced to dial back on production themselves, according to a Reuters report that described the effect that outlined their effect on major European suppliers of Japanese car companies. This ripple effect could stall production longer than anticipated. On the flip side, automotive component manufacturers in Japan have also seen their shipments to both European and American automobile companies disrupted, which could additionally cause delays in the building of a wide range of vehicles.

For new car buyers, the gap in Japanese production combined with uncertainty regarding component supplies and the already tabulated inventory losses could result in a definite holdup in terms of certain models making it to showrooms in the United States. It is likely that it will take several weeks before the entire impact for new car buyers is completely understood, with delay times and specific vehicle availability uncertain until then.


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