The automobile industry is unique in that it relies heavily on parts and services coming from many different geographical regions. The Japanese earthquake, tsunami, and nuclear meltdown disaster, coupled with Thailand’s flooding, has autombile manufacturers scrambling for safety. Toyota, Nissan, Honda, and even Ford are struggling to protect their factories in Asia. Production in 3 plants in Thailand will be halted as well as delayed production in other regions: North America, South Africa, Indonesia, the Phillippines, and Vietnam. According to estimates, auto production in Thailand will be down 130,000 units this year, due to flooding. Automakers are looking to re-evaluate the supply chain and come up with short-term solutions. The Thailand floodings alone will cause a 10% drop of profits for Honda, Toyota, and Nissan, respectively. The Thailand floods will certainly hinder the recovery of Japan.
The automobile industry is one of the most diverse, but comes with a cost. Although spreading plants throughout the world cuts costs, natural disasters and political uncertainty cause problems in the supply chain. Failure to produce in one plant will cause a ripple effect in other plants. The automobile industry in Japan is enormous, and a halt in production is utterly devastating. Japan’s road to recovery seems dim.
I think this whole issue caught people by suprise. Nobody realized how many parts are outsourced around the country