While the immediate focus of Japan is on rescuing the wounded, recovering the dead and caring for survivors, the island nation is slowly coming to grips with the impact of last week’s natural disaster on its largest industry: automotive manufacturing.
The massive earthquake and the devastating tsunami that followed appear to have wrecked or washed out to sea thousands of new cars. The force of the natural disaster also crushed plants and left manufacturers large and small struggling to take stock of the damage.
Auto production is on hold at least temporarily, and it remains to be seen how long it will take to get production up and running again. The impact of the stoppage could be felt for months in Asia and around the world — by automakers, workers, investors and motorists, who could find some of their favorite vehicles in short supply.
More must-see stories
“The disaster will have a huge impact, and not just in Japan,” said auto analyst George Peterson of automotive research and consultancy firm AutoPacific.
So far it appears that only one auto industry worker was killed while on the job during the quake — a Honda employee crushed when the wall of a cafeteria came tumbling down at the carmaker’s technical center in Tochigi.
But thousands of vehicles have been lost or damaged, including 1,300 Infiniti luxury cars swamped by the tsunami at a storage depot by the port of Hitachi. Nissan said at least another 1,000 vehicles were damaged at the port of Miyagi — one of the cities most badly damaged by the disaster.
Nissan, Japan’s second-largest automaker, has suspended production at four plants through at least Wednesday, with two other assembly lines out of operation through at least Thursday.
The carmaker doesn’t yet have an estimate of what that will mean in lost production, but Honda, which will shutter its plants through at least Sunday expects to lose production of 16,600 cars and trucks and another 2,000 motorcycles and scooters.
Toyota, which builds a larger percentage of its products in the home market than Nissan or Honda, also has shuttered production and expects to lose a minimum 40,000 vehicles of production. A spokesperson said the stoppage cost about 6 billion yen, or $72 million, in lost profits for every day the plants remain closed.
The timing couldn’t have been worse for Toyota, the world's largest automaker and Japan's biggest company.
Just days before the 8.9-magnitude quake, the automaker announced a plan to boost worldwide sales to 10 million and drive profits up sharply. In the long run, industry analysts suggest the current setback may have little impact on the “Global Vision” announced by President Akio Toyoda, but that could depend on the depth of the damage to Toyota’s facilities and that of its suppliers.
- George Clooney Takes Over Downton Abbey in Hilarious 9-Minute Video
- The Orange Is the New Black Cast Adds a Twist to the '12 Days of Christmas' (VIDEO)
- David Schwimmer to Play Robert Kardashian in New FX Miniseries About O.J. Simpson
- Michelle Obama Can't 'Let It Go' - Sasha and Malia Are 'Too Old' for Frozen
- A Free Clarisonic? Yes Please! (It Can Be Yours When You Enter to Win!)
Part of the problem is that each auto plant depends on a network of hundreds of parts manufacturers, and it is unclear how badly those subcontractors have been impacted by the disaster, said Jim Hall of automotive analysis company 2953 Analytics. But “some assembly plants could feel it pretty soon,” Hall said, and the impact will be felt beyond Japan.
About half of all the Japanese-branded vehicles sold in North America are built in North America. But many of those factories still rely on Japanese parts makers for everything from engines and transmissions to the smallest “widgets,” notes analyst Peterson. If there is no additional source available for such components, U.S. car plants like the Nissan facility in Canton, Miss., or the Honda factory in East Liberty, Ohio, could be in trouble, he said.
Japanese factories traditionally rely on a “just-in-time” manufacturing system — where inventory is delivered to the factory by suppliers only when needed for assembly — but there’s a relatively long supply chain from Japan, so Peterson said the impact on those “transplant” assembly plants might not be felt until early April.
The impact of the crisis will likely vary from model to model, analysts say. Early signs suggest Honda could be hit particularly hard. Its Sayama plant, located in one of the regions of Japan hit hardest by the disaster, is a key assembly center, producing models like the Honda CR-V, Accord and Fit, some of them for export to the United States, as well as Acura’s RL and the TSX model. In addition, Honda said the Ogawa Plant, in quake-damaged Saitama, produces automobile engines.
For U.S. consumers, the situation might, at least briefly, repeat some of the product shortages experienced two decades ago when Japanese automakers agreed to so-called “voluntary” restraints on exports to the United States. That led to a sharp run-up in the price of Japanese automobiles.
Though he expressed hopes that car dealers will not exploit the situation, long-time automotive analyst Joe Phillippi of AutoTrends Consulting warned that “there is always a cohort of dealers who never let a good crisis go to waste. They will attempt to take advantage” by charging premiums if they believe anxious American customers will be willing to pay for Japanese products.
On the other hand, some observers believe this could give U.S. and Korean carmakers a great opportunity to eat into Japan’s market share.
But American automakers also rely on Japanese suppliers, and while they often use multiple sources for components, some key parts might come from just one supplier. In some cases, the absence of a single part could bring a whole plant to a halt.
The supply of automotive semiconductors is one big concern, said automotive analyst Rod Lache of Deutsche Bank. These are central components for digital automotive componentry, whether used in engine management systems, airbag controllers or infotainment systems. Japan produces nearly a quarter of the world's automotive semiconductors, and the parts are highly sensitive to damage during the production process.
Japanese battery suppliers are also central to production of American hybrid-electric vehicles, such as the Ford Fusion Hybrid.
So, the crisis in Japan could create big problems to Detroit automakers, as well. Indeed, two Japanese automakers are already halting some production at North American factories to assess availability of parts following Friday's deadline earthquake and tsunami in Japan.
Subaru of America has suspended production at its plant in Lafayette, Ind. The plant, Subaru's only North American factory, employs 3,500 workers and built 150,000 vehicles last year, including the Outback and Tribeca wagons and Legacy sedan. A company spokesman doesn't know when production will resume.
Toyota is suspending overtime and production on Saturdays at all of its North American plants to assess the availability of car parts. Toyota is trying to conserve parts after the huge earthquake and tsunami, which is disrupting shipments from Japan to the U.S.
Japanese automakers Nissan and Honda have said their North American plants have not been affected.
The Associated Press contributed to this report.