A Single Supply Disruption Can Take Down an Industry For Days (Maybe Weeks)

Earlier today, The Wall Street Journal (registration and subscription required) picked up on the news of Toyota's production shutdown in Japan (which was due in entirely to the damage caused by the shutdown of one of its suppliers, Tokyo-based Riken Corp, who supplies engine parts to a host of Global OEMs). According to the Journal, "Japan's No. 1 car maker by sales will stop production for at least three shifts beginning this afternoon. Toyota, which usually operates two shifts a day, will reassess tomorrow whether the plants can resume production on Monday. The plants had a supply of parts that kept them running during the first few days after the quake hit Monday."

The article also notes that other car makers will be impacted as well, including Mitsubishi motors, who will "suspend production for at least three days at three of its major assembly plants." And Suzuki who "will suffer from a production loss of about 10,000 cars and 5,000 motorcycles because of a temporary shutdown at five domestic plants." In addition, "Fuji Heavy Industries Ltd., which makes the Subaru brand of vehicles, will stop production at five plants."

Most important of all, the article notes how this one supply disruption "highlights how auto companies are relying on a common parts maker for a crucial part of their product ... Riken provides parts for more than half the cars built in Japan and about 20% of cars world-wide, according to the company, including vehicles from Ford Motor Co., BMW AG and Volkswagen AG." Will Germany and the US be impacted as well? I guess we'll have to wait and see.

Jason Busch

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