Japan Nuclear Evacuation May Force Hitachi, Boehringer to Abandon Plants

Hitachi Chemical Co. and Boehringer Ingelheim GmbH may abandon factories largely unscathed by last month’s Japan earthquake and tsunami as engineers struggle to contain radiation spewing from a crippled nuclear plant.

Boehringer, the world’s largest family-owned drugmaker, halted production at a factory that makes energy drinks in Namie, about 10 kilometers (6.2 miles) from the leaking power station following the March 11 temblor and tsunami. Hitachi Chemical shuttered a plant making carbon brushes for train motors in the same town, causing a parts shortage that disrupted rail services.

“We have no idea when we will be able to go back,” said Masayuki Hasegawa, a spokesman for the Tokyo-based Hitachi Ltd. (6501) unit. The company hasn’t yet decided on the long-term future for the plant, which employed 200 people and had annual sales of about 5 billion yen ($60 million), he said.

Workers and homeowners are unable to go within 20 kilometers of the tsunami-hit Fukushima Dai-Ichi plant, as the government has imposed an exclusion zone following the world’s most serious nuclear accident since the 1986 Chernobyl disaster. It may be years before radiation levels are low enough for people to return to some areas, said Hideyuki Ban, secretary general of the Citizens’ Nuclear Information Center, a Tokyo- based anti-nuclear group.

“Manufacturers are going to have to start production at other places,” said Mitsushige Akino, who oversees about $600 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Companies will have some stock on hand but suppliers are going to start losing business if they don’t restart production.”

Auto-Parts Makers

Tomiyama Pure Chemical Industries Ltd. and Japan Brake Industrial Co. have both shuttered plants in the evacuation zone supplying automakers including Honda Motor Co. and Mazda Motor Corp. The closures have contributed to carmakers being forced to curtail production, according to Citigroup Inc. analysts Noriyuki Matsushima and Manabu Hagiwara.

The shutdowns “are having a major impact on auto-part production,” the analysts wrote in an April 8 report, as they downgraded to “sell” Toyota Motor Corp., Nissan Motor Co., and Honda. “Employees cannot access the plants and there are absolutely no prospects in sight for recovery.”

The crippled nuclear reactors may eventually leak more radiation than was released at Chernobyl, Tokyo Electric Power Co., the plant’s operator, said on April 12. The amount released so far is about 10 percent of the levels for the 1986 incident, Japan’s nuclear safety agency said the same day. The severity rating for the Fukushima nuclear crisis has been raised to seven, the highest level and the same as for Chernobyl.

The magnitude-9 quake and tsunami left more than 28,000 people dead or missing across the Tohoku region, northeast of Tokyo, according to the National Police Agency of Japan. More than 200,000 buildings were damaged, swept away or destroyed.

Golf-Club Shafts

Fujikura Rubber Ltd. (5121) has offset the shutdown of a plant making golf-club shafts in Odaka by increasing output at a factory in Vietnam, said Hiroshi Miyata, an acting general manager. The Japan plant cost about 600 million yen to build and employs about 160 people, he said.

“We don’t know when we’ll be able to use the factory again,” he said. “It was largely undamaged by the earthquake and tsunami.”

Hitachi Chemical has asked other companies to make the carbon brushes it produced at its Namie plant and is dispatching workers to help them, Hasegawa said. The factory, which opened in 1966, had a Japan market share of about 50 percent, he said.

JR West Services

A lack of carbon brushes, which transfer electricity in train motors, caused West Japan Railway Co. (9021) to cut services following the quake. It resumed a full timetable last week after being assured by Hitachi Chemical and other carbon-product makers that alternative supplies would be available, Takayuki Sasaki, president of the Osaka-based company, said last week.

Boehringer has moved production from its factory in Namie to other parts of Japan and it will also relocate the 40 employees who worked there, said Erika Nakajima, a spokeswoman for its SSP Co. unit.

“Many people have mixed feelings,” she said. “They are attached to the area, so they wish to go back one day.”

The company, based in Ingelheim, Germany, hasn’t decided yet whether to permanently shut the factory, she said.

Japan Brake abandoned efforts to repair its plant in Namie last month following the evacuation alert, it said on its website. The company, which supplies brake-disc pads to Honda, Mazda and brake-makers, may turn to rivals to help offset the shutdown, said Yoshihisa Igawa, a spokesman. The plant employed 345 people.

Battery Fluids

Tomiyama, which made electrolytic fluids for lithium-ion batteries at a factory in Okuma, may also ask other companies for help, said Kazuhiro Endo, a spokesman. It hasn’t started considering the long-term future for the plant, he said.

Once the Fukushima nuclear plant has been successfully stabilized and there are no more leaks, authorities will likely begin to narrow down the exclusion zone to particular hot spots, said Ban at CNIC. Still, it’s too early to say where those points will be and even in other parts of the zone it may be years before it’s safe, he said.

“Radiation levels in the evacuation zone could remain high for five to 10 years,” he said. “People and companies will have no choice but to move to other areas.”

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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