Just when it looked like the global auto industry was headed for a recovery, many carmakers could be knocked down on their knees again by the widening effects of Japan’s devastating earthquake and tsunami.  Some carmakers in Japan are extending their factory shutdowns into a third week following the March 11 earthquake, but the full brunt of the disaster won’t be felt until mid-April, experts say, when factories around the world begin to run out of parts made in the affected areas of northeast Japan.  Parts shortages from Japanese suppliers may reduce global automobile production by about 30 percent, research firm IHS Automotive told Bloomberg today. That would be a huge cut, equivalent to production levels at the depth of the credit crisis and recession in late 2008 and early 2009.  The setback is likely to be temporary, but will depend on how quickly suppliers can resume operations. Citigroup warned investors this week that a genuine recovery in automobile production will likely be pushed back to at least the fall of this year.  The earthquake and tsunami damaged some suppliers’ factories, while others are coping with problems caused by rolling blackouts and damaged roads and ports. If parts plants affected by the quake don’t return to operation within six weeks, global auto output may drop as much as 100,000 vehicles a day, said IHS Vice President Michael Robinet. The global industry ordinarily produces 280,000 to 300,000 vehicles daily, he said. In the two weeks since the earthquake hit, IHS estimates lost production of about 337,000 vehicles, most of it in Japan.  But the problem won’t be confined to Japan for long. “Most vehicle manufacturers will be affected by this,” Robinet said. “It will be very difficult for any major automaker to escape this disaster.” For example, the supply of airflow sensors has come under heavy pressure after a Hitachi Automotive plant was badly damaged. Hitachi supplies about 60% of airflow sensors to all leading automakers, including Ford Motor, GM, Renault-Nissan, Toyota, and Volkswagen.  Getting a handle on the extent of the damage to suppliers is difficult. Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, said as many as 500 to 600 smaller suppliers may currently be out of commission. “Some have literally disappeared along with their labor forces,” he said.  Carmakers in Japan are coping by shifting production to other plants where possible, while in North America, manufacturers are cancelling overtime or stopping production of slow-selling vehicles in order to conserve parts for repairs and for those vehicles in higher demand. General Motors, for instance, has idled a plant in Louisiana that makes small pickup trucks. Toyota Motor has warned its North American employees and dealers that production interruptions in the U.S. are likely, even as it begins to resume production at some factories in Japan. Nissan Motor, meanwhile, said it might ship engines from its plant in Tennessee to Japan to make up for lost production at a Japanese engine factory.  One of the hardest-hit manufacturers is Honda Motor. The company said two of its plants would remain idle until at least April 4, after which it will decide on a production schedule based on the availability of components. Honda also said it will temporarily move some engineering work out of its research and development facilities at its Tochigi plant to other plants while it continues to assess the damage.  Even if just one crucial part is missing, a carmaker cannot build a vehicle and the entire company can quickly shut down. In 1998, a strike by workers at two GM parts factories in Flint, Mich., forced the shutdown of GM’s entire North American manufacturing operation within four days. The strikes lasted almost two months, costing GM $3.5 billion in operating profit and 2.5 points of market share it never regained.
Barely back on its feet after the downturn, the entire industry is staggering from the effects of the Japanese disaster