Japan Disaster Breaks Auto Supply Chain

The seven major Japanese automakers have either stopped or scaled back production in Japan because of the earthquake and tsunami. Most of the seven major Japanese car companies say they'll return to production this week.

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The triple disaster in Japan: earthquake, tsunami and nuclear crisis has brought the country's auto industry to a virtual halt. The world's biggest automaker, Toyota, says it is extending the shutdown of its factories in Japan. Same for Honda. Nissan resumed operations at some plants last week but says it will continue only as long as inventory of parts will last.

Companies are struggling with power cuts and a shortage of parts. Even the Swedish carmaker Volvo and Detroit's General Motors have both stopped some production because of a shortage of parts.

NPR's Sonari Glinton reports has more on how the Japan earthquake is rippling through the global car industry.

SONARI GLINTON: When people talk about the economic effects of the earthquake and tsunami in Japan they often use these words:

Ms. TRACY HANDLER (Senior Analyst, IHS Automotive): Supply chain.

GLINTON: Two simple words to explain something that is incredibly complex.

Tracy Handler is good at explaining stuff. She's an analyst. So she's going to help me explain the automotive supply chain.

Ms. HANDLER: When you build a car, there are thousands of parts that going into building that car. And when you get to the final assembly you have parts that have come from all over the world to go into the car.

GLINTON: That goes all the way back to rubber, the plastics, the electronics, the precious metals that go into the microchips, the iron ore that's mined and then turned into steel and on and on.

The supply chain though isn't just the stuff they put in the cars; it's how it all moves. It includes shipping, air freight, trains, trucks all the different shipping channels that would move parts from one place to another.

Let's go back to Tracy Handler from IHS Automotive.

So what's happens when one piece of that chain is gone?

Ms. HANDLER: You end up with nothing. In order to build a car, you have to have every piece. There is not one piece that you can say well, I'll add that later.

GLINTON: Not one piece. But there are factories all over the world making car parts.

Ms. HANDLER: If you have a part that is not being made due to a factory being down or something being down, you can't just go to the factory next door and say hey can you make this widget.

GLINTON: Well, I asked Tracy Handler, why not?

Ms. HANDLER: Because of the complexity to the product that goes into a car and the validation because so much of it is safety related, that tooling can't be just switched from one person to another.

GLINTON: Handler says it would take anywhere from six weeks to six months to change suppliers from one part of the world to another. So far none of the automakers have been willing to make those changes until they know exactly how their suppliers in Japan are affected.

But let's check in on the last link in the supply chain.

Mr. GEORGE GLASSMAN (Owner, Glassman Auto Group): We're standing in the parking lot. There's nothing but cars and sunshine and hopefully and a lot of buyers.

GLINTON: George Glassman runs his family's Hyundai, Kia, Saab and Subaru dealerships in the suburbs of Detroit. Glassman says right now, he has a 60-day supply of cars and shipments are coming in every day. One even arrived while I was there.

Mr. GLASSMAN: Having an ample supply of vehicles or having the right supply regardless of the time of year is always a fine balance. So, you know, right now I'd say we're fine, but in terms of how that will change from day to day, I can't be more overly concerned about the situation, until I know more.

GLINTON: Each of the car companies foreign and domestic is trying to come up with that information. They all say they're continuously studying their supply chains. That means they're accounting for thousands if not millions of individual parts. And Tracy Handler says because of the fluidity of the situation in Japan we may not find out what part is missing until its time to put it on a car.

Sonari Glinton, NPR News.

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