Most Japanese automakers have extended their vehicle production stoppages into a third week after the devastating earthquake and subsequent tsunami that hit north-eastern Japan on 11 March. The delay in resumption of component supplies is also affecting the global supply chain, hitting non-Japanese automakers' production schedules, IHS Global Insight automotive analyst Paul Newton wrote in a research note on Thursday (24 March).

"Automakers are finding it difficult to restart vehicle production in Japan in the absence of a resumption of component and power supplies. However, suppliers' condition remains grim, especially in the affected areas of Japan, which could further delay the resumption of vehicle production at domestic plants. This has also begun to hit the supply chain for even non-Japanese automakers across the world," he said.

"IHS Automotive believes that the impact of the supply shortage will begin to be felt more intensely by global automakers by the middle of next month. Many automakers have already started adjusting production owing to an unavoidable delay in supplies of components manufactured in Japan."

As reported by just-auto today, several Japanese automakers have extended their vehicle production shutdowns in Japan into a third week and, most recently, Honda has announced that it has extended the suspension of finished vehicle production at its Sayama and Suzuka plants through to the end of next week (4 April). The third-largest automaker in Japan said it would decide on its production schedule beyond 4 April after taking into account the availability of components. Honda has almost completed the repair and inspection work at its Tochigi plant in Tochigi prefecture but has decided to temporarily transfer some functions such as car development and procurement out of its research and development (R&D) facilities in Tochigi to other plants including Sayama, Suzuka, and Wako.

Although Suzuki restarted vehicle production at its Kosai, Iwata, and Sagara plants in Japan on 22 and 23 March, it has again suspended assembly operations at these three facilities from today (24 March) through to 27 March. However, the company will continue to operate other domestic facilities that assemble engines and produce cast components today and tomorrow (25 March), although only the day shifts, as long as the stock of components lasts. The company says that it will later reassess the situation before deciding on operations from 28 March. Mitsubishi has also started assembly operations today at one of its subsidiary's plant in Gifu prefecture and tomorrow will restart production at a plant in Aichi prefecture. However, the automaker will maintain the production suspension at its plant in Okayama prefecture on both days.

Meanwhile, Toyota has said that it will resume production of three hybrid models—the Prius, Lexus HS250h, and CT200h—in Japan from 28 March. The company will restart production of the three hybrid models at its Tsutsumi plant in central Japan and at Toyota Motor Kyushu's plant in the south of the country. Earlier, Toyota announced that it had decided to postpone the launch of the Prius wagon and minivan hybrid scheduled for early next month. The company has already extended production shutdowns at all of its assembly plants in Japan through to 26 March. However, it has resumed production of components at some of its facilities in Japan in order to meet requirements at its overseas assembly plants.

Commercial vehicle manufacturer Isuzu has meanwhile announced that it has extended the production suspensions at its Fujisawa plant in Kanagawa prefecture and its Tochigi plant in Tochigi prefecture until 25 March. Earlier, the company revealed that the two plants had suffered little damage to equipment as a result of the earthquake and tsunami. The Japanese truckmaker has decided to restart production of components from 28 March to serve the vehicles already on the roads. Meanwhile, Hino has extended production shutdown at its plants today. Earlier the company had decided to stop operations at its plants in Tokyo and Gunma prefectures until 23 March.

Threat to global supply chain

According to Newton, the expected delay in the resumption of deliveries of components by Japanese suppliers is "threatening the global supply chain".

"Toyota has hinted at the possibility of further production cuts at its facilities in North America. The automaker has already stopped overtime operations and production activities since Saturday (20 March) at its 14 plants in North America. Nissan meanwhile believes that the conditions of suppliers in the earthquake and tsunami-affected areas are worse than may appear prima facie. Carlos Ghosn, chief executive officer (CEO) of Nissan, told Bloomberg that about 40 component suppliers remain in difficulty even almost two weeks after the earthquake hit the country. Most of these suppliers are facing multiple problems, affecting their ability to resume component deliveries."

"This is serious and it's still difficult to evaluate. You have the earthquake, you have the tsunami, rolling blackouts, and fuel shortages hitting at the same time, and they aren't only hitting the car manufacturers, but also the suppliers and the dealers," Ghosn said, adding that it will take the company at least until the middle of April to resume production at its Iwaki engine plant in Fukushima prefecture.

Nissan is considering shipments from its Tennessee plant in the United Sates to Japan in order to meet supply shortages at the Iwaki factory. Nissan's other plants in Japan are undamaged and resumed component production on 21 March. The company has begun vehicle production at some plants from today. Fuji Heavy, which makes Subaru-brand vehicles, has cancelled overtime shifts at its Indiana assembly plant in the US until 1 April. The plant assembles the Legacy, Outback, and Tribeca, as well as the Toyota Camry.

Newton added: "However, the impact is not limited to the Japanese automakers. Most automakers source components from Japanese suppliers and the disruption to the supply chain has hit the production schedules of even non-Japanese automakers. Supplies of plastics, rubber, and electronics components are reported to be falling short and this could disrupt the production schedules of several automakers.

"Global automakers, including General Motors (GM) and PSA Peugeot-Citroën, have either announced production cuts or are in the process of reducing production in the US and Europe. For example, the supply of airflow sensors has come under heavy pressure after a Hitachi Automotive plant was badly damaged by the earthquake and subsequent tsunami.

"Hitachi Automotive makes the sensors at a plant in Sawa in Ibaraki prefecture and is responsible for a share of around 60% of airflow sensor supplies to all leading automakers, including Ford, GM, Renault-Nissan, Toyota, and Volkswagen (VW).

"GM has already halted production of small pick-up trucks at a plant in Shreveport, Louisiana (US) as a result. In addition, the automaker has stopped some production at its facilities in Eisenach (Germany) and Zaragoza (Spain).

"PSA Group is also considering reducing production at most of its European facilities owing to the shortage of sensors, which is expected to affect production of the Peugeot 207, Citroën C3, and other models. PSA is considering cutting production at it plants in Madrid and Vigo (Spain), Poissy and Aulnay (France), and Trnava (Slovakia) by between 40% and 50%, while production at its domestic plants in Sochaux, Sevelnord, and Mulhouse is being cut by up to 75%.

Outlook, implications

Newton said Japanese automakers are still assessing the situation before resuming vehicle production at their domestic plants. Although some automakers have started operations at those domestic plants that were not so badly affected by the earthquake and tsunami, these are mostly engaged in the production of components in order to service vehicles already on the road or to meet requirements at overseas facilities. Some automakers have resumed vehicle production, but this is limited by stocks of components shipped before the natural disaster hit the country.

"Suppliers are finding it more difficult to resume production of components in the absence of a proper supply of raw materials and power. The resumption of the transport network in Japan (rail, road, and ports) is going to take time and this affects not only component supplies to the domestic plants but also exports.

"Meanwhile, global automakers are assessing what the situation will be once the existing stocks of components end. Some automakers have already begun reducing daily production capacity at their plants. IHS Automotive believes that the more pronounced impact will be felt from the third week of April.

"Generally, automakers keep different levels of part supplies and disruption to supplies from Japan may take three to four weeks to affect US-based manufacturing operations because of the time taken to ship the components."

According to an estimate by IHS Automotive, for each day that Japanese light-vehicle production is not functional, a production loss of around 37,000 vehicles is being incurred. According to this estimate, the light-vehicle industry in Japan is expected to have incurred a production loss of 335,000 units by the end of 25 March, two weeks after the natural disaster hit the country.