INSIGHT: Japan crisis weighs on Europe's auto industry

18 April 2011 17:23  [Source: ICIS news]

By Tanzeel Akhtar

LONDON (ICIS)--The European automotive industry is starting to feel the effects of the Japanese earthquake and tsunami, as several car makers struggle for parts and supplies, forcing them to reduce production.

Japan’s export-driven economy is struggling to get back on its feet, and some have speculated that it may take at least six months for it to return to normal.

As Japan is a major supplier of vital components to the global automotive industry, the lack of supply has had a negative effect on some chemicals used in the sector.

Demand for nylon 6,6, which is used for engineering plastics in automotives, fell by up to 30% following the 11 March earthquake and tsunami.

However, some manufacturers, such as Germany’s BASF – which supplies coatings, plastics and polyurethanes – remain relatively optimistic beyond the short term. BASF has forecast 6.1% year-on-year growth in global auto production this year.

“BASF is carefully monitoring the situation at its customers' and suppliers' sites worldwide. At the moment, it is still too early to determine whether there will be any financial impact on BASF,” spokesperson Julia Buchner said.

“However, we do not expect that the disaster in Japan will have a major impact on our global business with the automotive industry with regard to full-year 2011,” she added.

US plastics compounder A Schulman also forecasts a minimal impact on its business. A Schulman's two materials sourced from Japan are an anti-block UV additive and a specialty polyvinyl chloride (PVC) resin.

The company acknowledged the possibility of a “secondary impact” on global downstream industries, such as electronics and automotive, saying: “It’s still too early to quantify what impacts these secondary factors may have on our business.”

Short working weeks for several manufacturers have been announced for European plants affected by the earthquake, as Toyota Motor, Honda Motors, Bosch and Nissan have all had to slow down production.

Toyota has had to shut down facilities in the UK, France, Poland and Turkey for several days this month and will also do so in May. In its most recent statement, the company said it is continuing to address its production situation in Japan.

Vehicle production from 10 May to 3 June “will proceed at approximately 50% of normal”, Toyota said.

It is estimated that the company will lose 40% of its global production in the second quarter.

There are still serious problems posed by the Fukushima Daiichi nuclear plant, which has led to power shortages in Japan.

Tokyo Electric Power Co (TEPCO), which supplies around one-third of Japan’s power, is facing fines for its response to the explosions at the plant following the earthquake and tsunami. Its main priority is to supply electricity for general household consumption rather than industry.

The recovery period will depend on each individual company's level of damage, said Kiyokazu Murata, general manager at the Japan Chemical Industry Association.

But the longer-term impact of the disaster still remains unclear.

The European Automobile Manufacturers’ Association (ACEA) said it was too early to say how the industry will be affected, while the UK's Society of Motor Manufacturers and Traders (SMMT) said that despite three Japanese car manufacturers making announcements about how their facilities have been affected, there has been nothing from the other companies.

The SMMT said that it is currently difficult for manufacturers to tell what the impact will be on their businesses as they do not know how long it will take for Japanese producers to start up again and how long it will take to get new products to the car manufacturers that need it.

“There is some apprehension among [the car manufacturers in the UK]. They certainly don’t think they are unaffected but as yet they have not reported any immediate issues to us,” said Nikki Rooke, spokesperson for the SMMT.

“All of them do source something from Japan and at the moment they are using up the components that were effectively shipped just before [the earthquake and tsunami] happened, and then they are looking what they can source from other European suppliers,” Rooke added.

The European Chemical Industry Council (Cefic) said any negative impact would be modest.

Cefic’s chief economist, Moncef Hadhri, said: “For much of 2011, exports should soften but in the second half should begin picking up and strengthen into 2012 as rebuilding takes place.”

Franco Capaldo contributed to this article

Click here for latest news on the Japan disaster

By: Tanzeel Akhtar
+44 208 652 3214

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