Japan quake causes worry at Shanghai auto show

Japan's earthquake and tsunami disasters have cast a pall over the Shanghai auto show, where industry heavyweights are fretting over just how long the resulting supply disruptions will last.

Output from Japanese manufacturers has been cut by more than 500,000 vehicles since the devastating earthquake and ensuing tsunami struck on March 11, and that number could rise to one million, auto experts said.

But the ripple effects are being felt far wider due to the country's central role as a producer of vehicle parts and components ranging from the circuitry used in navigation systems to equipment that produces various paint colours.

Japanese auto giant Toyota, which had already announced domestic production disruptions, said Wednesday it would scale back output at its plants in China by 50 to 70 percent until June 3 due to the parts shortage.

The move will mean 80,000 fewer cars roll off those lines.

Many key Japanese components manufacturers are based in the worst-hit regions of Japan, their facilities damaged by the 9.0-magnitude earthquake or inundated by the giant wave that followed.

Before Toyota's move, Global Insight analyst Carlos da Silva told AFP China's production would fall an estimated 25,000 vehicles by the end of April, Europe's output would shrink by 55,000 and North America's by 68,000.

Toyota has already been forced to suspend production in several factories in Europe, Australia and North America, compounding the effects of the lost output at home.

"Due to the situation in Japan, I hesitated to come to China right up until the last minute," Toyota President and CEO Akio Toyoda said in Shanghai.

Other Japanese carmakers have also been hit, with Nissan temporarily shutting down its facilities in Mexico. American carmakers General Motors and Chrysler also scaled back production in the United States.

Among European companies, Renault has had to cut production at its South Korean unit. Meanwhile, Mitsubishi Fuso, Daimler's Japanese subsidiary, is "slowly resuming" work, Daimler Chairman Dieter Zetsche said.

France's PSA Peugeot Citroen sent home several thousand employees due to the supply disruptions, but its management board chairman Philippe Varin said in Shanghai output remains "on course for the short term."

Da Silva said that some factories outside Japan have not suffered because they are using existing stock.

But he added: "We will see the impact worsen at the end of April if the current situation continues."

The length and severity of the quake's effects remain a worrying unknown at the moment.

"When I talk to people in the industry they say... 'It's coming and we don't know the magnitude of the impact'," said analyst Michael Dunne, president of Hong Kong-based Dunne & Co.

Joe Hinrichs, Ford's Asia-Pacific president, warned in Shanghai, "We're still a couple of months away from seeing how the full effect goes."

General Motors has a set up a 200-strong team to monitor developments and has situation rooms in Shanghai, Tokyo and Detroit, GM International Operations President Tim Lee said.

"We monitor the situation 24 hours a day, seven days a week," he said.

Other carmakers around the world are also coordinating daily between sales and supply-chain operations.

"There could still be more aftershocks from the earthquake. Little by little things are restarting, but we are not at the point where we can say production has resumed completely," said Yann Lacroix, an analyst for credit insurer Euler Hermes in Paris.

Another danger for Japanese carmakers is the risk of losing customers if they are unable to resume production quickly.

"If you go to a Japanese manufacturer and you have to wait for six months, what do you do? Do you wait on hold?" Lacroix asked.

A longer-term effect could be that companies will look for parts suppliers elsewhere, but "it is a bit soon to talk about that," Ian Robertson of BMW's management board said.

laf/dd/dma/slb

 

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