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March 22, 2011updated 08 Apr 2021 8:08am

‘QUAKE ANALYSIS: Japan losing 335k units, all OEMs affected end April

Japan light vehicle output is expected to be reduced by about 335,000 units to the end of this week (25 March, 2011), and virtually every major OEM globally will be affected by the earthquake/tsunami disaster by mid-to-late April, IHS Automotive director of global automotive forecast, Michael Robinet, said in a note emailed to media on Tuesday.

Japan light vehicle output is expected to be reduced by about 335,000 units to the end of this week (25 March, 2011), and virtually every major OEM globally will be affected by the earthquake/tsunami disaster by mid-to-late April, IHS Automotive director of global automotive forecast, Michael Robinet, said in a note emailed to media on Tuesday.

Total Japan output could be reduced by as many as 450,000 units by the end of March, “rising at a rate of 37,000 units per day if all volume is impacted”, he added.

“Several OEMs have started component production in Japan to prepare for vehicle build later this week, but the ability to commence is still variable“.

Component shortages have begun to affect locations outside Japan at both Japanese and non-Japanese vehicle manufacturers. Lost volume is only around 10,000 units thus far, although rising exponentially as more facilities are affected, Robinet wrote.

“It could take seven weeks of full production with overtime at a facility to compensate for one week of lost production volume – if all components are available and volume is not lost due to demand decline.

“The situation surrounding the devastating earthquake and subsequent tsunami off the coast of northeastern Japan is still not completely clear. Outside the horrific human toll/dislocation and infrastructure destruction in northeastern Japan, the lack of clarity surrounding the Fukushima nuclear radiation situation has provided an additional brake on meaningful restoration efforts. The combination of a magnitude 9.0 earthquake and the resultant tsunami caused the loss of much of the power distribution grid, clean water and wastewater services, passable roads, rail, and the critical port system.”

Minimum requirements to resume output

According to Robinet, production at light vehicle assembly plants in Japan will be restricted by several factors over the short term that are the minimum required to resume output:

  • Physical condition of supplier facilities and ability to resume components production
  • A sufficient supply of trained workers to reach production facilities
  • Condition of communication, road, rail, and port infrastructure, as well as the availability of various fuels (petrol, diesel, and lubricants) to resume production and goods flow
  • An ample and stable power supply (without rolling brown/blackouts), as well as other necessities such as running water and sewage/wastewater treatment
  • Most important is a stable supply of feeder components/systems to ensure output

Supply base condition critical

The state of several OEM production facilities in the affected zone has been roughly established with varying states of production readiness, Robinet wrote.

“Most component/material facilities have little or no damage that would inhibit the resumption of output once stable component/system supply resumes. More critical is the condition of the supply chain and its aforementioned inherent ability to resume output. Ample incremental capacity to compensate for challenged Tier-1, -2, and -3 capabilities in the northeastern Japan region is difficult to launch quickly and, quite possibly, nonexistent. Some components are single sourced, so immediate shifting of supply is not possible.”

“Substantive” near-term bottlenecks to overcome

Capability to produce integrated circuits; semi-conductors; LCD displays; sensors; and even silicon, the base material, is in question, the note said. “This is possibly most important to global OEMs – the downstream effects are beginning to impact volume outside of Japan. Already in tight supply, the loss of this output is now being felt globally with varying impacts. Impact varies from immediate to 4-6 weeks downstream.

“[The] state of the production capability for petro-chemical feedstocks (specialty resins, synthetic rubber, etc) are also beginning to surface. Rubber supply was already constrained before the disaster. This situation may have downstream impacts within 1-3 weeks.

“Interconnected powertrain supply is a critical issue. The quake zone is the home of gear, clutch components, specialty bearings, and other specific components. Exposure is possible to both automatic and manual/DCT variants. There is limited ability to vary final production mix with restricted powertrain availability. Impact will be felt with varying effects from this week forward.

“Specialty materials shortages, such as automotive float glass, specific metals (boron, high strength steels, and stainless varieties), and silicon output. Effects vary depending on sourcing, inventory, and availability of alternative supply.”

Impact on Japanese light-vehicle production

Robinet noted that Toyota had already announced the loss of over 110,000 units of production (including Daihatsu) up to an earlier planned 22 March vehicle assembly resumption however, the company said today suspended vehicle production at its 12 TMC and subsidiary vehicle manufacturing plants would will continue until (and including) 26 March, a scheduled Saturday production day.

The automaker added it had, however, resumed production of replacement parts on 17 March and resumed the production of parts for overseas production (including knockdown assembly kit parts) on 21 March. The new setback will see total unit losses widen from 95,000 to 140,000 units at Toyota alone.

According to Robinet, output is expected to be affected until late this week at most facilities.

“Toyota is resuming output at several component plants closer to Nagoya (south of Tokyo), although this may be short-lived. Toyota facilities on the island of Hokkaido (transmission) and Tohoku (specialised forgings/castings) in the quake zone are challenged. We now expect output to be impaired through 25 March at most facilities, especially those for export with enhanced electronic, hybrid or powertrain requirements.

The note said Nissan will attempt to resume output at all facilities later this week, “though this plan is tentative. The Iwate engine plant (V6 engines) will need to depend upon its US sister facility as a temporary backup. Our expectation is that downtime will extend into late this week as a base case for Kyushu facilities reliant on V6 powertrains.”

Robinet said (Fuji Heavy) Subaru had reported that all its manufacturing facilities had been shut through 21 March, primarily owing to power-conservation efforts and damage checks. Downtime is expected to be extended into late this week as a base case.

“Honda has idled several plants… through 23 March [since partially extended to 27 March – ed]. Honda’s supply base was undermined (possibly more than others) because of the proximity of suppliers to their final assembly facilities in central Japan. Downtime is also expected to extend into next week. Quite possibly, Honda’s core supplier base could be most affected by the disaster.”

Robinet expects Suzuki, which closed all its plants in Japan through 21 March, to continue with downtime extended into late this week as a base case. Suzuki and Honda have some common suppliers.

Mazda reported earlier that, although none of its facilities have been affected by the disaster, as its plants are primarily located in southern Japan, well away from the quake-affected areas, it would idle production through 21 March with intermittent volume thereafter. “Our expectation is that downtime will extend into late this week as a base case,” Robinet wrote.

Mitsubishi production commenced on 17 and 18 March “with various levels of success”. Output was cancelled for 21 March and MMC said today it had operated both day and night shifts on Tuesday 22 March and production would now be suspended on Wednesday 23 March. On Thursday 24 March, MMC plans to operate only the first shift at its PMC plant while production at Okazaki and Mizushima remain suspended.

“As for [Friday 25 March] and thereafter, operations will be carefully deliberated according to the surrounding circumstances,” the automaker said..

“For each production workday that Japanese light vehicle production is not functional, around 37,000 vehicles are lost. This loss would need to be compensated for once output can resume,” Robinet wrote.

Impact on light vehicle output outside Japan

The IHS Automotive analyst said several Japanese OEM facilities outside Japan had eliminated overtime, reduced CKD build, and were rerouting components to areas of highest urgency.

“For each production workday that Japanese OEM light-vehicle production outside of Japan is not functional, about 52,000 vehicles are lost.”

He noted that non-Japan OEMs are not immune to the impact of a compromised supply chain in northeastern Japan. “Through the Tier-2 and -3 supply chain, the majority of OEMs utilise electronic components from Japan; the race to find ample capacity for these highly specialised components (semi-conductors, displays, sensors, resistors, etc) before inventory depletes will be very challenging. The effects will emerge in the coming weeks – several variables will influence how quickly these issues take effect and how quickly the OEMs can overcome supply disruptions. Look for most facilities to be affected by compromised supply within the three-to-six-week timeframe.

“For each production workday that global light vehicle production is not functional, around 285,000 vehicles are lost. This loss would need to be compensated for once output can resume later in 2011 if required.”

Lost volume and ability to compensate later in 2011

Robinet’s suggested ‘order of production conservation due to component inventory issues outside of Japan would be:

  • Delete overtime and reroute components for CKD build immediately towards volume build locations
  • Prioritize components (when shared) to facilities with leaner vehicle inventories, new product launches, or those building high-margin products
  • Shift mix (often not possible) towards lower content offerings if short supply components are optional
  • Begin rolling production reductions (morning or afternoon shifts)
  • Cease all production at the facility until ample supplies are gained and supply is stable

“Once production commences, the ability to compensate for lost production hinges on the availability of components to feed increased output and the ability for labour structures to handle overtime,” he wrote. “As an approximate calculator, for every week of lost production it will take around seven weeks of full output with overtime to compensate. This is only the case is full supply of components is assumed. If output is challenged in Japan for more than four weeks, compensating for lost output could run into 2012.”

Looking ahead, Robinet said: “The short-to-medium-term loss of stable component supply will have a substantive effect on the ability for the final production facilities to quickly resume operations. Damage to the supply chain is still to be completely determined. Several suppliers have formed ‘crisis teams’ to establish exposure throughout their entire supply chain and fast-track component substitution if required. In the end, virtually every major OEM will be affected by this disaster by mid-to-late April. It is not a matter of if, but when.”

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