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
