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Tags: AS | Japan | Earthquake | Auto | Parts | Paralysis

Japan's Auto Parts Makers Struggle after Disaster

Sunday, 17 April 2011 03:11 PM

In the days after Japan's earthquake and tsunami, Masahiko Horio knew he had to get his factory back online quickly.

Customers were clamoring. The backlog of orders swelled.

The zinc and aluminum widgets made by his company, Horio Seisakusho Co., appear insignificant at first glance. But the tiny metal components represent a vital fraction of the thousands of parts used in a single car.

The global supply chain that feeds the giant automakers — Toyota, Honda and General Motors — begins at unassuming companies like Horio Seisakusho. Japan's recent disaster showed that one missing link can grind production lines around the world to a halt.

The imperative to resume normal output is pressing for small parts suppliers throughout northeast Japan, which must keep customers happy or face the prospect of losing major business to competitors at home and abroad. Already, companies in Taiwan and Southeast Asia are seeing orders climb as customers search for alternative supply sources.

The 54 employees at Horio Seisakusho in hard-hit Ishinomaki produce some 600 different electronic and auto parts, including basic components for car antennas and navigation systems. It managed to avoid tsunami damage because it sits on a hill. Nonetheless, the earthquake and power shortages idled its machines for two weeks.

Horio, the manufacturer's president, faced another serious problem as he frantically worked to restart operations. An even smaller firm that finished and tested a half-dozen of his parts was wiped out by the March 11 tsunami. Horio couldn't ship supplies to customers without this final step in quality control.

A visit 40 minutes away to where the 14-person company, Ogatsu Musen, once stood revealed the extent of the destruction. The frame of the building remains, but little else. A boat juts out from the gutted structure. Horio's metal components and the equipment used to perfect them lay scattered amid the debris.

But there was urgent work to be done. And the president decided that if Ogatsu Musen had no building, he would provide the equipment and make space at his own company until it found a new home.

"We thought about other options at first," Horio said. "But Ogatsu is fast and knows how to do this work. And we didn't want to impose any further burdens on our customers."

His company is operating at about 80 percent capacity now, but the future is far from clear. Horio worries about electricity shortages in the summer that could curtail output and whether customers might turn elsewhere.

"We just need to recover as quickly as possible and make sure that our customers are confident in our ability to provide supplies," he said.

The Japanese parts crunch has reverberated around the world, from Malaysia to the U.K. to the United States. Industry analysts and U.S. dealers have said the auto plant shutdowns will cause shortages of some models, especially small and midsize cars, in the coming months.

Toyota Motor Corp. said this week it will suspend production in Europe for eight days because of the parts shortages. The move follows an announcement last week that the world's No. 1 automaker would stop car production in North America in April. In Japan, Toyota has suspended output except at three plants, which are running at limited capacity.

Toyota spokeswoman Shiori Hashimoto said the company was struggling to secure around 150 types of auto parts.

Similar problems and shutdowns have afflicted rivals including Honda Motor Co., Nissan Motor Co., Ford Motor Co. and General Motors Co.

It's distressing to watch for Hirohito Yokoyama, managing director at Iwaki Diecast Co., about 40 miles (65 kilometers) south of Horio Seisakusho, in the town of Yamamoto.

His company makes slightly bigger parts used in engines. It sends components for torque converters, oil filters and engine control units to automakers like Toyota and Honda.

"The worst thing for us is that we stop our customers' line by stopping our own production," Yokoyama said during an interview at the company.

The earthquake caused structural damage to the factory and equipment. The tsunami washed away thousands of parts that employees fanned out to salvage in the surrounding rice paddies. They sat in rows of crates outside, caked in mud and unusable.

Electricity shortages have added to its woes. Parts of the plant remained in the dark even as the company brought in diesel generators to restore some power.

The company estimates disaster-related costs of roughly 300 million yen ($3.6 million), on top of the 360,000 yen ($4,300) a day it is spending on diesel, Yokoyama said.

Both Iwaki Diecast and Horio Seisakusho are located in Miyagi prefecture, which suffered the highest death toll in the disaster. Of the 13,700 confirmed deaths so far, more than 60 percent were in Miyagi. Its Pacific coastline is ravaged, and tens of thousands evacuees continue to live in emergency shelters.

Before the tsunami, Gov. Yoshihiro Murai's economic road map aimed to boost his prefecture's economic output 20 percent by 2016. The auto and electronics parts industries were key pillars of his growth strategy.

In April 2010, the prefecture established an office dedicated to promoting the auto parts industry, and celebrated when Toyota subsidiary Central Motor Co. opened a new factory in the prefecture in January. It had hoped to foster the local economy by connecting small manufacturers with the major auto-related companies with production bases in the area, including Toyota, Alps Electric Co. and engine parts maker Keihin Corp.

Instead, it is now tasked with assessing the damage to the industry, said Yuuki Takahashi, head of Miyagi's Automotive Industry Promotion Office.

"We were really moving forward," he said of the region's pre-disaster economic momentum.

The biggest concern now among the region's parts makers is whether they can actually recover.

"And even if they do recover, they wonder whether their products will sell again," he said. "If several months go by, automakers themselves might go somewhere else and form new relationships."

© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

In the days after Japan's earthquake and tsunami, Masahiko Horio knew he had to get his factory back online quickly.Customers were clamoring. The backlog of orders swelled.The zinc and aluminum widgets made by his company, Horio Seisakusho Co., appear insignificant at first...
Sunday, 17 April 2011 03:11 PM
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