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Wed 23 Mar 2011 07:53 PM

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Japan disruptions force delays to new car launches

Toyota says it will postpone launch of two new additions to its Prius line-up amid quake impact

Japan disruptions force delays to new car launches
Toyota

Supply chain disruptions in
Japan have forced at least one global automaker to delay the
launch of two new models and are forcing other industries to
shutter plants and rethink their logistical infrastructure.

Toyota Motor Corp said on Wednesday it would delay
the launch in Japan of two new additions to the Prius line-up, a
wagon and a minivan, from the originally planned end-April due
to production disruptions from this month's devastating
earthquake.

The world's biggest automaker has suspended production at all
of its 12 domestic assembly plants at least through March 26 and
has estimated a production loss of 140,000 vehicles until then.

The automaker is just one of dozens, if not hundreds, of
Japanese manufacturers facing disruptions to their supply chains
as a result of the quake, the subsequent tsunami and a
still-unresolved nuclear threat.

"We still don't know the full extent of what can be done to
substitute the affected parts," Honda Motor Co
spokeswoman Natsuo Asanuma said. Japan's No.3 automaker has
suspended production in Japan at least until March 27.

Japanese companies are not only reeling from damage to
factories and suppliers in quake-hit northeastern Japan, but are
also suffering from fuel shortages nationwide and power outages
in the Tokyo area that are affecting production, distribution
and the ability of staff to get to work.

Ford Motor Co said on Wednesday it had felt no
immediate impact or disruption from the earthquake in Japan this
month.

"Right now, we have no immediate impact to our production in
terms of our supply chain, but clearly you would expect us to be
looking at that on a daily basis and we are ... locally,
regionally and globally," Peter Fleet, the president of Ford
ASEAN, told Reuters in an interview.

Shares in Toyota fell 1.2 percent in a Tokyo market
down 0.8 percent.

Suzuki Motor Corp said its three car assembly
factories in Japan will remain closed on Thursday and Friday,
but they will operate an engine factory on those two days using
parts already in inventory. The company said it has yet to
decide on plans for next week. Suzuki shares fell 3.1 percent on
Wednesday.

Meanwhile, Panasonic said on Wednesday that a
factory making printed circuit board materials in Koriyama,
northeast Japan, re-started Wednesday. Several other factories
in the region remain closed, including one in Fukushima making
optical pick-ups and one in Sendai assembling digital cameras
and audio equipment. The company declined to give any details
about other affected plants. Panasonic shares fell 1.3 percent
on Wednesday.

Renesas Electronics Corp , the world's No.5
chipmaker, has restarted operations at three earthquake-hit
factories in Japan, a spokeswoman said on Wednesday.

Operations at three other factories of the firm's 22 plants
in Japan remain suspended after the production restart at three
plants located in Aomori and Yamagata prefectures in northern
Japan.

Japan's airlines and its aerospace industries are also
suffering logistical woes.

The crisis in Japan "has firmly shaken up the aerospace
supply chain," according to the research and consulting firm,
Frost & Sullivan.

Japan's three first-tier aerospace firms -- Mitsubishi Heavy
Industries , Kawasaki Heavy Industries and Fuji
Heavy Industries -- "all have major roles in the Boeing
787 programme and all have 787-related production facilities in
Nagoya, as do the subcontractors that supply them," the company
said on Wednesday in a report.

"Considering the fact that 35 percent of the 787 and 20
percent of the 777 are from Japan, Boeing faces considerable
financial risk at the cost of uncertainty in its supply chain."

Mitsubishi shares fell 1.4 percent on Wednesday. Kawasaki
shares rose 1.2 percent and Fuji shares fell 6 percent.

Mitsubishi, Kawasaki and Fuji have said that their plants in
Nagoya are unaffected by the earthquake and are not suffering
any production disruption, the report added. Boeing has also
"categorically" said it has enough inventory to cope with any
short-term disruptions its Japanese suppliers may face.

Frost & Sullivan said the catastrophe had raised some big
questions about the globalised supply chain and just-in-time
manufacturing.

"Aerospace companies have realized that a global supply
chain is a double-edged sword, with the losses almost nullifying
the gains. This disaster will cause companies to revisit the
trade­-off between lowest cost and availability."

Echoing those comments on the global supply chain was Paul
Kleindorfer, the Paul Dubrule Professor of Sustainable
Development at the INSEAD business school in France.

The crisis would encourage more resilient and robust supply
chains, he said.

"We'll see greater attention paid to the finding of
additional sources of supply, but those sources in other
countries will face high hurdles because of the high quality of
Japanese manufacturing and that's not going to be easy to do in
other countries in Asia. Japan will continue to occupy a special
role along with South Korea and Taiwan."

Kleindorfer also said all companies, not just in Japan,
should use the crisis there as an opportunity to focus on
selecting or "pre-qualifying" alternative sources of supply that
they can rapidly switch to in case of a disaster.

Companies also need to invest in a "war room" infrastructure
so that when a crisis happens, "they have the ability to respond
and to ascertain and rehearse and switch and tell their
customers and their boards what they can expect. It shouldn't
take a month to figure out what happened."

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