Toyota Motor Corp.'s short reign as the world's biggest automotive manufacturer by unit shipment is forecast to end this year, with General Motors regaining the title it lost only a few years ago. In addition to problems related to defects-related recalls and problems in the United States last year, Toyota's shipping ability has also been crippled by the March earthquake and tsunami in Japan.
More than bragging rights are at stake. Toyota's reputation, financial health, and competitive strength have been jeopardized by the disaster, and it may take at least one year or possibly two before the company finally gets back firmly on its feet. Toyota is not alone, though. All Japanese automakers, including Honda, Nissan, and Mitsubishi, are equally at risk, according to Standard & Poor's, which said the companies' supply chains have been compromised by the disaster. Rebuilding and bringing Toyota's globally admired manufacturing system back to its old vaunted status could take years.
In a recent research report, Standard & Poor's downgraded its outlook on six Japanese automakers and parts suppliers to Negative from Stable and warned that the companies, including Aisin Seiki Co. Ltd., Denso Corp., and Toyota Industries Corp., face the possibility of extended products cuts, which could hurt their ability to compete internationally. The outlook downgrade at a time of immense pressure on the supply chain could further complicate the ability of these companies to obtain loans or sell bonds at the favorable rates they have long enjoyed.
The experience of these companies may give us an idea of what is happening behind the scenes in Japan as the high-tech sector tries to figure out the extent to which the earthquake would affect the supply chain. The updates provided so far by most electronics companies that either operate in or source parts and raw materials from Japanese vendors have been lacking in details, with most claiming "no effects" from the earthquake. Is this really possible?
Of all the corporate releases that I have reviewed, only a handful of companies, including Apple Inc. (Nasdaq: AAPL) and Freescale Semiconductor Inc. , have either admitted to some negative implications or warned they expect future disruptions. In its case, Freescale has said it will not reopen its Sendai facility that was "seriously damaged" during the earthquake.
Thankfully, many other electronics facilities operating in the country have been spared, but apparently not the extended supply chain. Japan is still experiencing rolling blackouts, and power supply won't return to pre-earthquake level for some time. This is likely to further complicate efforts to restart manufacturing plants and is seen disrupting transportation or hindering other regular business activities, as the Standard & Poor's report on the automotive sector indicated. The impact is even being felt outside Japan, according to the ratings agency. Here's an excerpt from the Standard & Poor's report:
Supply chain disruptions are posing a greater challenge for Japanese automakers than Standard & Poor's initially anticipated, and have forced virtually all Japanese automakers to significantly cut output in Japan. The impact is also starting to spread to production outside Japan. At most Japanese automakers, overall domestic and overseas output is currently at about 50 percent of initial production plans.
Although we currently expect parts shortages to be largely resolved by around July, we believe that full production is unlikely to recover in the summer due to expected electricity shortages in the Tokyo metropolitan and surrounding areas and a time lag for parts to be delivered to overseas plants.
If Japanese automakers and parts suppliers, including their electronics components vendors, are feeling the pinch so much, what exactly is happening to other segments of the high-tech supply chain? Do we really know?
I also agree on that. Infrastructure related damage effecting supply chains will definitely effect any and all business in that area. Really not a good news. Hoping that suppliers from other parts of world will be able to supply parts and products to the market. I would say this is time for american car manufacturers to take back their customers at least some percentage of them.
Definitely the earthquake will impact all businesses in Japan. Toyota's recall crisis put's it in a worse stand. I wonder what percentage of Toyota's manufacturing is actually done in Japan. I know a lot of the African countries have Toyota plants for their local market.
Its a mess.Thats the best way I can use to describe the situation at Japanese Auto Supply Chains.
The reason is nobody has any clue of who needs what and where(thanks to inventories and schedules having gone haywire because of the Quakes and Tsunamis in Eastern Japan).
How long is it going to take to sort out of the situation-Much longer than June.What happens if the TEPCO plant blows up?? We are in big,big trouble....I think the Suoply Chain will the least of our concerns then.
Toyota is a multinational corporation which has it's production sites in multiple parts of the world. Because of this, it does have the advantage of being able to shift it's manufacturing from one factory to another. Although this may not product the full amount of output and the shift may be slow, but does have the option. Other Japanese OEMs who are only based in Japan and have no production sites anywhere else would be suffering far more than Toyota or other multinationals.
When Toyota issued the recall on Tacoma due the Acceleration problem, it affected all the Japanese auto industry, now this tragedy will hit them again.
Toyota Mexico just win the price of Best company in America - let's see how this bring benefits to their bussines.
I agree with you. I expect Japan to know that several manufacturers will take the advantage and aim at gaining market share. I expect to see more automakers aside Kia and Hyundai gaining more stability in market as Japan recovers.
This shortage, while affecting Japanese auto makers, is affecting other industries as well. The good news is that the shortages have not been for any essential products that could present worldwide panic. The shortage for Japanese auto makers just opens up the market to other automakers to gain market share. Some companies may benefit from this situation while others will have a long road to recovery.
I think part of the issue for automakers is their qualification process for suppliers is very strict and as such they don't have as much flexibility in their supply chain as the consumer market. The majority of components in cars are mission-critical--safety--and the AVL criteria for suppliers is rigorous. This is as it should be. SHort of making compromises, the auto industry doesn't have much choice except to wait out the shortage. It may take longer to qualify new suppliers than it does for factories to get online
This is a very unfortunate event for all of Japan. Not only do they have all of the devastation to deal with, but their large exporting businesses that might have survived the disasters are now feeling the effects of the crippled infrastructure. With the global growth of the Japanese automakers gaining ground on other manufacturers, they now might not be able to deliver new just released models for months. This could cause sales to go to other rivals. Toyota will most likely be able to regain its number 1 position with some time.
The events in Japan are truly tragic and the effects may last several years.The disruption in their auto industry may prove to be an opportunity for non-Japanese automakers to gain additional market share.I recently read an article that touted Korea as the “New Japan” of automaking thanks to Kia and Hyundai.In March, Hyundai sales in the US grew 32% and Kia sales in the US grew 45%.Hyundai has become the fastest growing automaker in the world thanks to their very successful Elantra and Sonata models.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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