Following last Friday’s devastating earthquake off the north-east coast of Japan near Sendai there has been a suspension of production at the majority of plants in the country. Though the full impact on the supply chain for both parts and finished vehicles is still being assessed, ongoing disruption is inevitable. Production shutdowns are now extending beyond the initial three days announced at plants that were not damaged as the country takes special measures to conserve the expenditure of power and direct it toward the relief effort.
While the damage to domestic output is unquestionable, the potential consequences for global production are being scrutinised because of the impact on tier suppliers based in Japan. The situation is still difficult to forecast but emergency logistics providers are already in place planning contingencies for “an imminent further tightening in capacity”.
A spokesman for one leading Japanese tier one–Denso–told Automotive Logistics News that none of its manufacturing facilities in Japan have been severely damaged but that a sales office closer to the epicenter was badly hit.
Production is officially suspended until tomorrow but due to the operations of some its customers, Denso said production directors will be making final decisions on the operations for each division.
In terms of supply overseas, the company said its operations in North America had not been affected but it was investigating potential issues with the supply chain with a clearer picture expected to emerge next week.
Impact on carmakers
In the main carmakers are concentrating on the safety of employees and their families while they assess the impact on their operations in Japan of both the earthquake, which registered an 8.9 magnitude, and the resulting tsunami.
Toyota, Nissan, Honda, Fuji Heavy Industries (which owns Subaru), Mitsubishi and Mazda have all reported production stops, with many extended to the end of this week.
Toyota is expecting a loss in output of roughly 95,000 vehicles up to Sunday this week (22 March) because of plant closures that are now exceeding the initial three-day shutdowns announced across all TMC plants. The majority were able to restart production on Friday but have stopped again since, including the subsidiaries at Hokkaido, Tohoku, the Central Motor Corporation Miyagi Plant, which also produces the Yaris model, and the Kanto Auto Works Iwate Plant, which produces the Scion xB and Scion xD.
The company is already reported to be suspending overtime shifts in North America in anticipation of a parts shortage on the 20% it sources from Japan. About 33% of the vehicles Toyota sells in the US are imported from Japan, and all models are expected to be affected.
The latest information from Nissan states that all plants, except for the Iwaki engine plant that continues to be hit by aftershocks, have been able to repair some damage but that delivery of parts from suppliers is limiting operations. The Oppama, Tochigi, Yokohama and Nissan Shatai plants are suspending operations until Sunday, March 20th. Meanwhile, Kyushu plant and Nissan Shatai Kyushu will resume production on Thursday and Friday while inventory supplies last but operations beyond Saturday, the 19th are yet to be decided. JATCO’s Fuji and Fujinomiya transmission plants remain suspended.
Nissan also reported damage to 2,300 finished vehicles during the tsunami, including 1,300 US-bound vehicles at the port of Hitachi, Ibaraki Prefecture and 1,000 vehicles stored at the Miyagi Service Center (near Tagajo City), which were slated for domestic production.
Honda has closed its Tochigi engine, transmission and chassis producing plant as well as two plants at its Saitaima facility–the Sayama plant producing CR-V Accord, US Fit, Acura RL and TSX models, and the Ogawa plant making vehicle engines. It also closed a transmissions plant at Hamamatsu, and its Suzuka facility, which makes the Japan Fit, Civic, Civic Hybrid, Insight and Honda CR-Z.
The company expects to lose more than 16,500 units of production up to March 20 with 2,500 bound for the US.
Mitsubishi Motors said that its three production hubs located in the areas of Aichi, Gifu and Okayama, which produce Shogun, ASX, Lancer, Lancer Evolution X and the pure electric i-MiEV, have so far been unaffected by the situation.
Meanwhile, though no Mazda plants were directly affected, suppliers to the company have been hit and, along with its concerns for power saving, the company suspended production at its Hiroshima and Hofu plants for the whole of this week.
Mazda said vehicle delivery in Europe not expected to be affected.
For ocean forwarders it was a case of waiting for details of the full extent of the damage to be confirmed, though offices remained in operation.
NYK Line said in a statement that all of its offices remained open but that communication in the north and east of the country was unstable because of planned outages designed to conserve energy for use with the rescue efforts.
Operations at ports around Japan were suspended last weekend and delays are expected due to berth congestion.
NYK said that Sendai and Hachinohe ports were severely damaged by the tsunami and remained out of operation, while its container terminal at Tokyo resumed partial operations on Monday night. The company has suspended acceptance of new bookings for the ports of Sendai and Hachinohe, as well as at Hitachinaka, Ofunato and Onahama ports.
“The current situation may warrant a temporary change of rotation or omission of ports which will be considered on a vessel-by-vessel basis,” said the company in a statement.
Wallenius Wilhelmsen Logisticsspokesman Jon Spampinato told Automotive Logistics News: "We are relieved to report that all WWL employees in Japan have been accounted for and are safe. WWL offices in Tokyo and Nagoya currently are open and operational, and we have not had any reports of damage to WWL vessels."
“K” Line, meanwhile, reported only minor limitations on its services while further investigations are pursued into day-to-day and longer-term business according to Peter Menzel, the company’s director and general manager of the Car Carrier Group. He confirmed that all "K" Line staff and families were safe and coping well with the situation, and that no severe damage to ships has been reported. But while the company prepares a fuller statement he said its focus would be on “the safety of staff and business continuity”.
Long term there is expected to be disruption to the supply of parts and vehicles from Japan to global markets but the extent of this disruption on overseas production remains unclear.
Honda said that there was no immediate impact on its operations in North America, with more than 80% of Honda and Acura models sold in the US being made there, as well as the vast majority of parts also being sourced in the same region.
It did state, however, that it was assessing the long-term impact on production there, which may be affected by those parts that do come from Japan. The company has reported to have lost contact with 44 of its 113 suppliers in the area most severely affected by the earthquake and tsunami.
Nissan said the knock-on effects to its business operations outside Japan were currently being studied but that it expected current stock levels in Europe to be sufficient to support ongoing sales operations in the immediate future.
A Toyota Motors Europe spokesperson said that the suspension of production in Japan will have no immediate impact for the delivery of vehicles and parts in Europe, but the company is assessing further impact on the ground in Japan will report later on any impact for its European operations.
Micro-chips and other electrical components are expected to cause the most disruptions to global production, as these are components that all carmakers, Japanese and non alike, source from Japan. The industry has already experienced shortages in microchips, and it was these sorts of components that led some manufacturers to halt production in Europe last year during Volcanic ash disruption to aerospace.
On the finished vehicle side, if disruptions persistent, export markets could see shortages in vehicles that are already in high demand, particularly the fuel efficient, hybrid and electric vehicles for which Japan specialises. With rising oil prices, demand is expected already to be strong for models such as the Toyota Prius and Nissan’s all-electric leaf, launched in the US and European markets this year. Many carmakers had already reduced vehicle inventory in markets like the US, where American Honda and Toyota have already reported very high allocation rates for vehicles arriving in ports.
However, vehicle inventories are not expected to be depleted immediately. Mitsubishi, for example, has confirmed that it has a four month supply of vehicles in Europe.
Contingency plans are being put in place elsewhere. While recognising that the overwhelming priority was dealing with human consequences, Brad Brennan, managing director of emergency logistics provider Evolution Time Critical, said that it was at times like these that contingency plans are tested to the limits.
“We are seeing that the traditional solutions are either already not working or may stop working as air traffic becomes more focussed on evacuation and relief. When this eases, capacity issues will continue due to cargo backlogs creating universal demand for premium solutions. Throughout this difficult time, a creative approach built on knowledge of alternative providers will pay dividends.
Current problems included sudden power blackouts of 3-4 hours, damage to highways bridges and sporadic national telecommunications. There is also the threat to international flights from Tokyo Narita airport given the problems at the Fukushima nuclear facility.
“International flights are operating, with priority being given to passenger evacuation,” said Brennan. “Most of our calls for support have been for onboard couriers [and] this solution is subject to seat availability.”
Brennan went on to say that Evolution already had a specialist on the ground working full-time to prepare for what it believed would be an imminent further tightening in capacity which would have an inevitable impact on deliveries to European vehicle manufacturers and tier ones.
“Our thoughts go out to all those affected. At times like this commercial matters seem very trivial. We will, however, continue with our analysis and be fully prepared for when the situation stabilises and logistics support is required once again to get production lines moving,” he added.
Meanwhile, emergency logistics provider Priority Freight reported that few challenges for its client's sourcing of parts from the global supply chain had so far been reported, though the growing crisis in the Fukushima nuclear facility could make things more serious.
In terms of transport services, managing director Neal Williams said that it was not seeing a great a disruption from air freight services from Japan to Europe, though one of the company’s main partners in Japan did have to close its warehousing and handling facility in Narita Airport. However, he lauded the resilience of the local people in being able to resume a near normal service incredibly quickly.
“As there are currently both OEM and component suppliers shut down in Japan, this will disrupt the automotive global supply chain, with the effects of this going to be felt in the coming days and weeks if they are not able to resume production,” Williams told Automotive Logistics News. “We have discussed this with our leading customers and we are prepared to react at their request and changing circumstance.”
Williams warned that backlogs and an escalation in disruption to hit urgent cargo moves should conditions deteriorate further at Fukuskima. “We believe that provision of emergency freight will increase accordingly,” he added.
(pic courtesy of Press Association)