Worst fallout is yet to come for Japanese, global automakers

Monday, Mar 28th, 2011 @ 4:44 a.m.

Very few have doubted that the devastation in Japan was anything less than historic, but new reports about potential future fallout are painting a grim picture that is expected to hit the canvas next month.

As it stands now, Japan’s major automakers have largely stopped all new vehicle production as they continue to assess the damage to their factories and their supply chains, but a report by the Associated Press is suggesting that the true production stoppages may not be felt in the U.S. until April, when the delay caused from shipping finally catches up with the supplies that were already en route via slow-moving ships.

Leftlane has already reported on known potential shortages, such as the issue affecting Ford and Chrysler – and possibly others – thanks to a paint pigment shortage, or how Toyota has put all of its North American plants on notice that they may face work stoppages in the near future, but it appears that issues such as these are shaping up to be more widespread and long-term than previously expected.

The AP points out that a great deal of Japan’s total automotive industry, not just the automakers themselves, is currently sitting idle. Initial reports by automakers may have given false hope as the automakers announced that for the most part, their factories were either unharmed, or only suffered minor damage. The problem is that it now appears the damage to second- and third-tier suppliers, as well as the near;y nation-wide shortage of power, electricity, fuel and transportation is keeping even the undamaged facilities from operating.

Costs to automakers will hit the billions
Financial giant Goldman Sachs has put numbers to the losses by some Japanese automakers, and the picture they paint is grim – at best. Goldman estimates that Japanese automakers are losing $200 million every single day their plants are idling, which means losses have already climbed to roughly $2.8 billion. That means that moving forward losses could continue to tally $1.4 billion each week – a staggering figure.

To given an idea how serious those losses could be, Toyota’s total annual profits in 2010 would be wiped out in just 11.5 days at the estimated industry-wide loss rate.

What does this mean to the industry as a whole?
While on the surface it may seem like the devastation in Japan will give automakers based in other regions of the world a competitive advantage, the supply chain issues will likely continue to plague automakers from all origins, although none likely as heavily as those based in Japan. The customers will also lose because of the changes, as it is expected that global vehicle production could drop by as many as 5 million vehicles in 2011, from the projected 72 million to be built.

That translates to a smaller supply, and higher prices. In addition to the higher prices driven by shrinking supply, choices will also be limited, ranging from color choices to options, or even models.

Although no one knows for sure when the troubles will hit and where, it is being projected that the month of April could see substantial production stoppage as a result of part shortages in regions around the world.

References
1.’As Japan shuts down…’ view

View the original article here

My Living Nightmare: Our Japanese Correspondent Reports from Tokyo

As I sit here in a press conference awaiting the latest update on the worsening situation at the crippled Fukushima nuclear power plant, these are the most painful words I have ever had to write.

As you no doubt know by now, at 2:46 pm on March 11, Japan suffered its worst earthquake ever. The quake’s magnitude was measured at the record level of 9.0, leading to unprecedented tsunami waves sweeping across the Tohoku area 200 miles north of Tokyo. Complete towns disappeared in an instant as tsunamis towering up to 30 feet high sped across the coastal plains at speeds of up to 100 mph. News programs are predicting the death toll will rise to at least 10,000 souls by the end of the month. It could go much higher.

What has totally monopolized the nation’s major TV networks since March 12, however, is the developing crisis and possibility of massive radioactive fallout at the Fukushima plant. International media reports have already likened this potential catastrophe to the 3-Mile Island accident and even the Chernobyl disaster. As a resident of Tokyo, that horrifies me. But my current situation means instant evacutaion is impossible. Forced to buy tickets at highly inflated rates, colleagues and friends have already started to evacuate Tokyo, heading for places as far away as South America.

When the quake hit, I was conducting an interview on the 22nd floor of a skyscraper in central Tokyo. Having worked in Tokyo for 23 years, I have experienced literally hundreds of quakes. But nothing like this. The building swayed at least 4 feet from side to side as file cabinets and chairs were flung about the room. The movement was so severe that we could not stand. What shocked everyone in the room was not only the size of the quake but the length of it. Even after it finished 3 minutes later, the building continued to move for several minutes more as it absorbed the full extent of the shake. Elevators shut down immediately, meaning we had to negotiate 22 flights of stairs to exit the building. All trains and subway lines stopped and the expressways were closed, leading to total gridlock and mass exodus of workers heading home on foot. Mobile phone systems overloaded within minutes, meaning that the only sure way to reach loved ones were landlines. It took me two hours to reach my wife, although for some strange reason, my sister in Australia got through to me within half an hour.

Then, some 24-hours after the initial tragedy, panic buying started. Wanting to stock pile food and drinks for the expected post-quake hardships, people started to buy rice, bread, instant food and drinks in bulk. At the same time, the government ordered supplies be sent to the distaster area to aid survivors. That combination has led to empty store shelves across the greater Tokyo region, a scenario not seen since the aftermath of WWII. Then from Sunday morning, as word got around that gasoline tankers would be redirected to the area as well, motorists raced to their nearest gasoline stands to fill up. As I drove around Tokyo on Monday, I was flabbergasted to see cars and trucks 50 deep stuck in queues in front of gasoline stations, waiting to fill up.

With the massive disruption to train systems and other lifelines, Japan’s car manufacturers also shut down plants and restricted staff attending offices. Toyota and Nissan have closed all plants for this week and required their staffs to leave offices by 5:30 p.m. when the sun goes down as electricity supply is being restricted heavily.

Although train lines were reopened just before midnight on March 11, all lines are operating on massively reduced schedules to counter the power shortages, which also started on Monday morning. In addition, the proposed test drive of the Honda Fit Shuttle has been cancelled and manufacturers are not taking any new press car bookings.  And for the first time, carmakers are willing to allow press cars to be returned half filled as drivers are not able to get to fuel stations.

I think I will stop here as my concentration level has dropped to nil having experienced a second aftershock in the space of an hour.

View the original article here

UAW VP: Expects Ford to share the wealth, won’t target Japanese automakers [Op-ed]

Friday, Mar 18th, 2011 @ 11:45 a.m.

Leftlane took an in-depth look at the apparent double standards exhibited by the United Auto Workers in an opinion piece in late 2010, but now a different union leader has spoken out, sharing similar thoughts in addition to an overly honest statement regarding the UAW’s relationship with automakers.

The latest commentary coming from the upper echelon of the UAW’s leadership was made by Jimmy Settles, vice president and director of the UAW Ford department, who commented on the recent bonuses paid to Ford’s executives. Settles explained that he has no problem with the bonuses since he knows the UAW will be compensated similarly.

“I am going to look at that on the up side and say that I know that they compensated them very well at the top, so I feel that they are going to compensate us at the bottom very well,” said Settles, adding, “they believe in fairness.”

Settles’ suggestions go above and beyond the fact that Ford already issued bonus checks to its hourly workers earlier this month, averaging over $5,000, as part of its profit sharing – a move that was not required per the contract with the UAW.

Settles went on to explain that with this year’s negotiations with Ford the UAW is “looking for everything – plus.” Settles went on to explain that the priority of the negotiations is to provide “what’s best for the membership,” with no mention of mutual benefits for Ford and the UAW.

Short-sightedness
The conversation offered by Settles is troublesomely short-sighted and selfish, following the pattern of the UAW immediately expecting “their fair share” when automakers post profits even for just a short period of time. But the UAW has never approached a single automaker to offer concessions when the profits turn to losses. UAW leadership says often that it wants a mutually beneficial relationship with the automakers, and yet it seems that its priority is far and away to increase its own income, rather than to develop a long-term mutually beneficial arrangement to keep both the UAW and automakers in prosperity.

Settles also offered an interesting thought regarding the UAW’s plans to continue targeting Japanese automakers operating in North America. The UAW has long argued that its involvement in production does not create a hindrance to automakers, but rather a positive synergy, and yet Settles said, “If they [Japanese automakers] are in dire need, we would not be trying to take advantage of the situation [aftermath of the recent earthquake and tsunami in Japan].”

Settles’ comment seems to suggest that the UAW organizing at an automaker would somehow create a strain on the respective automaker, a suggestion that seems to conflict with past arguments by the union.

What’s your take on the recent suggestions made by UAW management? Does the UAW have a point, or are they asking for too much, too soon?

References
1.’UAW expects Ford…’ view

View the original article here