Japan’s shockwaves linger

MM&D MAGAZINE, MAY/JUNE 2011:

One of the largest issues affecting the automotive industry remains the earthquake and tsunami that hit Japan March 11, says Jim Zamjahn, program manager, supply chain, with the Automotive Industry Action Group (AIAG).

“Much of our attention right now is focused on getting things in from Japan—that probably supercedes any local issues,” says Jim Zamjahn, program manager, supply chain, with the Automotive Industry Action Group (AIAG).

A big challenge for automakers right now, Zamjahn says, is access to information—knowing what’s in the chain and where. More than most other factors, that lack of visibility has slowed vehicle production. Japanese auto makers in North America have been most hard hit, followed by the US big three—General Motors, Ford and Chrysler. Korean manufacturers have seen the least difficulty in terms of parts availability, Zamjahn says.

Japanese plants have struggled with power cuts and a dwindling supply of components as a result of the March 11 disaster that devastated northeastern Japan. Toyota’s plants in Canada and the US have been running at 50-percent capacity several days a week, although the company plans to increase production to 70 percent of normal in June—faster than expected. The company is in danger of losing its spot as the world’s No. 1 automaker.

Chrysler also recently announced it has moved up summer shutdowns at three factories to June from the usual July because of parts shortages due to the Japan earthquake.

The AIAG has cancelled conferences because not enough people have been available to attend, he says, with many scrambling to keep plants running and little time for much else.

The search for supply chain information has been stymied by the fact many suppliers are in northeastern Japan, which has experienced power cuts.

“Communication has been disrupted and power is still iffy,” he said. “A chip producer has to have a reliable source of power to make chips—if you shut it down you might be out for days to recalibrate a machine. Not knowing what’s going to happen and not being able to make a commitment on supply is the issue.”

Another major concern—both from a transportation and industry standpoint—was the price of fuel, Zamjahn notes. While the change won’t happen overnight, the industry will likely see a shift from truck transport to intermodal, or rail, he says.

“Talking to steamship companies, they’re going to continue slow-steaming, which is extending the pipeline, although I don’t know that they’ll reduce speeds further,” he says. “But fuel costs are high on the list of concerns.”