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Saturday, March 12, 2011

The Impact of the Japanese Earthquake on the Industry: Quick Assessment

It's still too early to judge the impact of the quake on Japan's auto industry. Toyota had expanded to the northeast (Tohoku) during Japan's "bubble" and so is the most vulnerable. Nissan has plants east of Tokyo that would be close enough to the epicenter to potentially have damage. And ports in the area are swept clean of surface equipment and full of debris. There's vivid TV footage of a jumble of Infiniti's on fire at the port of Hitachi in Ibaraki Prefecture, about halfway between Tokyo and Sendai.
For the time being the ground is still shaking; a quick check of the Japan Meteorological Agency website shows more than 200 aftershocks, many in themselves significant earthquakes [As of 11 am EDT on 12 March]. Of course most would be hardly noticeable in a stamping plant – but not all. Plants in the area may not attempt damage assessment for a day or two. It's unclear whether major roads have any hard-to-repair damage; there are no reports of collapsed tunnels. That would be important as ports may be slower to recover.
My initial, largely uneducated guess is that small car production at Toyota's plants may require a couple weeks to recover; all it takes is one blocked road to one supplier or a hard-to-repair die to stop production. Even then, plants may not be able to run at full capacity for some time to come because electric power is likely to be rationed to large commercial users in that part of Japan.
More in a few days. David Ruggles is likely to pitch in; his wife was en route to Tokyo at the time, only to have her flight diverted to Anchorage. Sooner or later she will make it there, and be able to help us add texture to our posts.
Mike Smitka