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Japan earthquake rattles carmakers in China

2011-03-24 10:03

BEIJING - The global supply chain disruption following the earthquake and tsunami in Japan has sent shockwaves through auto makers in China, especially companies that are funded by Japanese car makers.

Many Japanese carmakers and parts producers have shut down operations because the disaster on March 11 damaged factories and infrastructure and caused delays in the shipment of raw materials.

The disaster-stricken northeast region of Japan is a major production base for auto and electronics components.

Toyota, the world's largest carmaker, announced on Tuesday that it would extend the shutdown of its eleven factories until Saturday, the second week after the catastrophe, in spite of a shortage in auto parts. Honda said that the production suspension would continue through Sunday.

Nissan, another major Japanese carmaker, resumed parts production at some plants on Monday and also planned to resume vehicle production on Thursday. But lingering fears remain over the possibility that the production could be affected by continued power outages and infrastructure problems.

The joint ventures of the three auto giants in China announced that it would not halt production in the short term due to their stockpile of auto parts. But in the mid- and long-term, they might have to reduce or even halt output if Japanese suppliers fail to ship parts due to the slow recovery.

Managers at Guangzhou Toyota and Guangqi Honda, the two joint ventures with Guangzhou Automobile Group, said their inventory of auto components could sustain normal production for two weeks through the end of March.

Dongfeng Nissan and Dongfeng Honda, another two joint ventures, have also said that they are capable of maintaining normal production until the end of the month, but warned that disruptions could not be ruled out next month.

A senior executive at a Sino-Japanese automaker said that Japanese car companies get 60 to 70 percent of their parts from China and the remaining key parts from Japan. "If the parts suppliers in Japan takes too long to resume production, the joint ventures will be affected," the executive said.

Some local brands could also face production disruptions because they receive key components from Japan to boost quality, according to the China Passenger Car Association.

Some carmakers would run out of stocks at the end of this month, the association said. If they did not adjust the operation pace, the production of some models could be halted under extreme circumstances, it said.

"Some domestic auto makers will have to find alternative parts suppliers from other countries," said Song Donglin, an economist and the president of Jilin University of Finance and Economics.

Chinese auto parts makers should learn a lesson from the supply chain crisis and move up the value chain, experts said.

China's auto industry should also boost indigenous innovation, particularly with increasing investment on the research and development of key components, said Li Junjiang, the head of the School of Economics under Jilin University.

"China has become the world's largest auto market, but we cannot call it an auto power," Li said.

Su Hui, an official at the China Automobile Dealers Association, said that the disruption could prompt Japanese auto parts producers to move some of their production to China and also bring opportunities to both local and other foreign brands as vehicle imports from Japan become affected.

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