More Quake Consequences: Car Production Could Drop 40 Percent
In a nasty little nutshell, here are a few major effects from the disaster in Japan: shortages in electricity; parts scarcities and increasing supply chain disruptions; higher car prices; and a possible 40-percent drop in global auto production.
That last one is the big bomb to fall. As you surely know by now, the auto industry has been internationalized for years, and so most all the bigger carmakers will be affected. A good summary of the situation is here.
Japan is home to the world’s second-largest car industry, and many important second- and third-tier suppliers are located there. Quite a few of these are still down and may not come back until summer.
We’re talking about things like airflow sensors and chips, paints, copper foil for batteries, rubber and plastic parts. A lot depends on how long present inventories can last. As we reported last week, prices are going up and will continue to climb for Japanese cars.
But there’s humor in every tragedy:
“It’s hard enough to sell a $60,000 Navigator in this economy,” says Fortunes O’Neal, general manager at Park Cities Ford in Dallas. “We don’t want to have to tell customers, ‘You’ve got to pick another color.’”
Or pick another dealer. Fortunes would probably be happier if he could dump the whole Lincoln franchise and sell only Priuses. Their transaction prices have zoomed over 10 percent in the last two weeks.
Customers are going to lose out, too, as global vehicle production may drop as much as 5 million vehicles in 2011. Goldman Sachs estimates that Japanese carmakers are losing $200 million every day their plants are idle—or about $1.4 billion a week.
At that rate, Toyota’s annual profit for 2010 would disappear in 11.5 days. That indeed would be a case of unintended deceleration.
Have you noticed higher prices on Japanese cars since the earthquake?