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Japan Earthquake, Tsunami and Nuclear problem.

On Friday March 11, a massive magnitude 9, one of the biggest in recorded history earthquake devastated  the North East Coast of Japan. In a few minutes, a raging tsunami 33 feet high hit the North East coastline destroying everything in its path.

Thousands have been confirmed dead and more are missing feared dead. It is one of the most horrible

 catastrophes in modern history to befall any society.To make matters even worse, now one of the nuclear power plants in the affected area is facing the possibility of a meltdown, and if that does happen, thousands more will be evacuated, whole cities including Tokyo as well as factories, centers of industries, shipping ports and other facilities will be shut down to avoid the radiation fallout. This will have a massive effect on the global Auto Industry.

Japan as a supplier of Electronic Goods, Automobiles and Other

Japan is the third largest economy in the world after the US and China. It is essential in the supply chain of many high consumer goods to the world such as automobiles, computers, audio visual equipment and others.

Japan made nearly 7.9 million vehicles in 2009, or about 13 per cent of the 61.7 million vehicles produced worldwide that year, according to the International Organization of Motor Vehicle Manufacturers.

The island nation also makes 44 percent of the world’s audiovisual equipment, 40 percent of electronic components, 19 percent of semiconductors and about 20 percent of all technology products.

Japan also supplies parts and components essential to the completion of high end goods to factories located in others parts of the world.

It is in the central part in many of the supply chains in the world.

But many of the companies that drive Japans dominance in these markets had factories based in theareas affected by the disasters.

Immediate Effect on The Automobile Industry

Toyota, Honda, Nissan, Mazda, Suzuki, Subaru and Mitsubishi, have all closed plants for varying periods in Japan to assess and repair the damages caused by the massive earthquake and tsunami.

Lets look at the big three only; Toyota, Nissan and Honda.

Toyota

Toyota,shut down 12 factories hit by the earthquake and suspended all production at its other factories in Japan, from March 14 to March 16, reducing output by 40,000 vehicles.

The company also halted overtime at its U.S. factories in order to conserve auto components supplies from its Japanese factories.

Most of Toyota’s factories are in Central Japan and will continue to operate after the suspension is over, but the challenge is now the supply of components which is an issue because some factories may not open again.

Toyota is the worlds biggest auto producer. The company made 234,045 vehicles in January in Japan alone. Its factories in the country account for around 38 - 50% of its total global output per annum which includes 8.5 million vehicles in 2010.

Though many of its factories are in the US and India and no doubt will continue producing, the problem is the supply of components from Japan.

As it is, these international factories may have enough to continue production for sometime but will have to solve a problem in the future if the Toyota plants in Japan do not come back online.

“Not only is the struck region one of our production bases, those directly hit and vastly affected include our dealers, suppliers and numerous other partners, Toyota President Akio Toyoda said in a statement issued on the company website Toyota City.

Nissan

Nissan, Japan’s second largest auto-mobile maker suspended production at four of its plants, varying from two days up until March 18, following the earthquake and tsunami.

The company lost 2,300 completed vehicles to the tsunami and fires. These vehicles were waiting to be shipped to from the Port of Hitachi to the United States. These vehicles included a number of Nissans electric cars and a small number of Nissan 370Z sport vehicles.

 All of the vehicles were produced at Nissan’s Tochigi plant.

A further 1000 Nissan cars for the domestic market were destroyed by the tsunami at the Miyagi plant.

About 1500 Nissan staff were provided emergency accommodation in the Nissan plants and offices due to the earthquake. There were no serious injuries reported.

Nissan was able to ship out 600 of its Leaf battery car on March 10 to the US, a day before the earthquake hit.

The Leaf is the first full scale electric production car by a major automaker sold in the US. In 2011 there are 20,000 reservations for the Leaf in the US alone.

Nissan promised by March this year one out of every six cars coming of the Nissan Oppama production line would be a Leaf. It looks like this deadline will be rescheduled.

Honda

Honda has reported two deaths in one of its factories because of the earthquake. The two deceased where killed when a factory wall fell on them.

Honda, the third largest automobile maker in Japan halted production at six factories, affecting the production of 16,600 automobiles and 2000 motorcycles.

Some analyst believe that Honda will lose 2billion yen per day because of the shutdowns.

Though Honda produces many cars and motorcycles in India and the United States, unfortunately its Honda Fit, Insight hybrid, Civic hybrid and CR-Z hybrid are all built exclusively in the Japanese plants, along with the Acura TSX and RL.

The company also cancelled the public launch of its much-awaited compact car Brio in India, scheduled for March 17, 2011.

 What Will Happen Now for Japan and the Auto-Industry

The tragedy of March 11 will no doubt affect the Japanese automobile industry and other industries for a long time.

Not only that, but the global supply chain that Japan is vital to will also undergo a shift as Japan industry focuses internally to rebuild itself.

Japan factories in the US and India and in other countries will either grow as they now become important in the new post earthquake production model supply chain or falter as their parent companies in Japan struggle.

No doubt other US and Europe car companies will see their market share take a boost in the US Africa and Europe markets from the potential shortage of various types of vehicles, especially the popular small cars and the luxury vehicles, most of which are produced exclusively in Japan.

Whatever happens it’s too soon to say.

Should the nuclear reactor actually experience a meltdown, the situation will change dramatically.

We wish the Japanese people strength and courage and our prayers are with them in these darkest of days.

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