Auto companies face Japan supply chain problems

EU autos Mar11.pngEU auto sales remained weak in February, and dependent on just 4 countries. As the chart shows (red line), they followed January in being at the bottom of historical monthly sales. Overall, January and February were down 0.3% versus 2010, with 2 million autos sold:

• German sales were up 16% at 435K; France was up 11% at 390k, The Netherlands was up 24% at 124K, and Belgium up 10% at 106K.
• These 4 countries were 52% of total EU sales, up from 46% in 2010.
• The other 3 of the ‘Big 5’ markets continued to see major downturns – Italy down 21% at 325K; UK 10% at 192K; Spain 26% at 120K.

Equally worrying for chemical and polymer companies are the signs that the Japanese disaster is likely to lead to weeks, if not months, of supply chain disruption. Many auto and component factories there remain shutdown, and power outages look set to continue into April.

This will have some bright spots eg Toyota Prius prices are rising in the USA, as supplies ex-Japan run low. But GM has announced a complete ban on “non-essential spending” – the usual first sign of a major problem. It had already announced shift-cuts at 3 factories in the EU/USA, whilst Renault has cut production in S Korea, and Volvo has warned of potential major disruption.

The issue is that today’s auto supply chains often depend on high-value electronic components, manufactured in Japan. Without these, the cars themselves cannot be assembled, even if all the other parts are still available.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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