Japan Quake May Cut Global Auto Output by About 30%, Researcher IHS Says

Parts shortages caused by Japan’s record earthquake may reduce global automobile production by about 30 percent, research firm IHS Automotive said today.

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 Michael Robinet, vice president of Lexington, Massachusetts-based IHS. The industry produces 280,000 to 300,000 vehicles daily, he said.

“Most vehicle manufacturers will be affected by this,” Robinet said in a telephone interview. “It will be very difficult for any major automaker to escape this disaster.”

About 13 percent of global auto industry production is down right now and production of about 320,000 vehicles has been lost, mostly in Japan, Robinet said.

Auto executives have refrained from forecasting lost production as their managers seek other sources for parts. If solutions aren’t found soon, most major automakers will experience disruptions by mid-April because supply networks are intertwined, Robinet said.

Automakers and parts suppliers around the globe are girding for possible shortages of key parts, especially electronics and transmission components, Robinet said. If carmakers can’t find alternate sources of parts, or if plants don’t come on line in eight weeks, as much as 40 percent of daily production may be lost, he said.

Lost Production

The third week of April could mark the start of more severe production slowdowns, IHS said. The industry may lose 1.2 million to 1.8 million vehicles by then and almost 3 million units within eight weeks, with about half of the losses coming from assembly plants outside of Japan, according to an IHS presentation.

“We could lose up to 5 million vehicles in a worst-case scenario,” Robinet said. “This will affect income for the entire year if this continues for an extended period of time.”

While the earthquake is “disruptive,” automakers aren’t likely to lose as much production as IHS’s worst-case scenario, said Jeff Liker, a University of Michigan engineering professor who studies the industry.

“It’s not the majority of parts, but rather a small number of parts that are critical,” Liker said in an interview. “There may be a part that is three levels down -- an electric circuit board or something -- that is needed. They will figure that out and find alternative sources.”

Honda Closings

Honda Motor Co., which today extended closings at two car- assembly factories until April 3, is one of the most exposed carmakers, Robinet said. The automaker has 110 suppliers located in the earthquake zone, and about 10 of them can’t say precisely how long it will take for them to recover, said Ed Miller, a spokesman.

Toyota Motor Corp. (7203), the world’s largest automaker, has shut down all vehicle-assembly plants in Japan until at least March 26. The company said it will resume production of three hybrid models in Japan on March 28.

General Motors Co. (GM) has idled two compact-car plants in Europe and a pickup factory in Shreveport, Louisiana, because of parts shortages. GM sent electronics parts from Shreveport to a factory in Kansas City, Kansas, where it assembles the more- profitable Chevrolet Malibu and Buick LaCrosse sedans, said two people familiar with the matter.

GM executives sent out a memo on March 18 asking employees to limit travel and expenses to only essential business. The move was a precautionary measure, said Sherrie Childers Arb, a spokeswoman.

Ford Motor Co. (F) hasn’t had any disruptions yet, said Todd Nissen, a spokesman.

Automakers can make up for one week of lost production with about six weeks of overtime, Robinet said. Japanese carmakers may not be able to make up the lost output in 2011, he said.

To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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