Although all Japanese domestic automobile factories had restarted by the middle of this
month after being halted due to the March 11 earthquake, plants are only
operating at about 50 percent of their normal output.
Eight major automakers released domestic production reports for March on
Monday. Except for Mitsubishi Motors Corp., all reported a more than 50
percent reduction in terms of automobile units on a year-on-year basis.
Mitsubishi was down 25.7 percent.
The main cause for the production cuts was parts shortages, the reports
said. As the firms' overseas production bases and foreign auto manufacturers
have also been affected, global automobile production will likely decline
further in April and onward. As automakers are tied to a broad range of
industries, production declines could have a major impact on the Japanese
economy.
The inventory of an Aichi Prefecture car dealership affiliated with
Toyota Motor Corp. has already reached bare bones, with even its showroom
emptied out. Now, test-drive cars do double duty as display vehicles.
"We get a lot of customers coming in, but we don't have cars to sell
them," one salesperson said.
Domestic automakers were operating factories only intermittently by the
end of March because of damage to production bases and parts makers in the
Kanto and Tohoku regions from the Great East Japan Earthquake. The situation
gradually improved, and all domestic factories were up and running again in
April, but production was only about 50 percent of planned.
After the Niigata Prefecture Chuetsu Offshore Earthquake in July 2007,
Toyota experienced a shortage of piston rings for engines and stopped
production at all its domestic factories. This time, operations were not
expected to be back to normal until November or December.
"This is the worst situation we've faced since the war," a source close
to Toyota said.
The main cause of the situation is a shortage of parts. According to
Toyota, about 500 different parts were lacking at one time. At present, the
supply of about 150 items is unstable.
Each automobile needs about 30,000 different parts, each one
indispensable. In addition to microcontrollers that regulate the engine and
other systems, brake parts and chemical products such as coating materials and
paint have been seriously lacking.
The auto industry has been asked to save electricity this summer to deal
with an expected power shortage, as have all businesses. Makers of parts and
other materials that are trying to recover from the earthquake likely will be
forced to reduce production further. Output declines at the automakers'
overseas plants also might be extended. Since most parts are transported by
ship, shortages abroad will be felt one or two months later than in Japan.
Toyota plans to cut production at its factories in China to 30 percent to
50 percent of normal, while U.S. factories were to have production cut by
about 30 percent. Honda Motor Co. and Nissan Motor Co. both cut production
further at U.S. and Asian production bases this month.
Sluggishness in the automobile industry, a star of the nation's
manufacturing sector, could seriously influence the entire economy.
Sinking auto factory operation rates also push down the production of
materials and parts, even if such makers are capable of full-fledged
operations.
"If you also count related industries, the auto industry makes up nearly
20 percent of the production volume of the manufacturing sector. So it has a
huge impact on the economy," said Hideki Matsumura, an economist at the Japan
Research Institute think tank.
The situation also affects the fierce competition for sales overseas.
Honda already has told U.S. sales outlets it would change a plan to send
Japan-made cars to the United States this year due to a shortage of new cars.
Toyota has postponed U.S. sales of new cars.
Domestic carmakers could miss the chance to increase sales in emerging
economies, which have been expanding rapidly in recent years. Foreign
automobile manufacturers also might turn to makers in other nations for parts
if they cannot rely on their Japan procurement routes.
If the parts shortages continue and the yen keeps appreciating, domestic
automakers will be forced to transfer production bases to overseas factories
in the mid- and long-term, some economists said.
