Disruption from Kumamoto Earthquake Hits Toyota Production

George Olcott, in Tokyo and Nick Oliver, in Edinburgh

Toyota announced yesterday that following its total closure of assembly plants in Japan from 20 April due to the Kumamoto earthquake, production would resume in stages from 25th April.

By 28th April, it is forecast that 18 of the 26 lines currently shut down will resume operations with production initially reverting to 80% of pre-earthquake levels.

A major bottleneck has been the complete closure of supplier Aisin Seiki’s Kumamoto plant, which produces key door components for Toyota. Aisin is making arrangements for overseas plants to supply these parts.

In other areas, particular in the recovery of local infrastructure, we are seeing many examples of the kinds of highly cooperative inter-firm behaviour that contributed so significantly to the rapid recovery of the supply chain in the wake of the Tohoku earthquake in March 2011, as described here.Examples include:

Electricity: regional electric power utilities located in Chubu (the Nagoya area), Kansai (Osaka) and the island of Shikoku have dispatched 500 employees to help Kyushu’s local electric power utility to help restore supply.

Gas: Tokyo Gas and Osaka Gas have sent around 1800 employees to help the local Kyushu gas utility to restore gas supply and detect and repair gas leaks. 500 vehicles are being sent to Kyushu by these gas utilities as part of this effort.

Such efforts to restore the badly damaged local infrastructure will be critical in the overall efforts to get the supply chain back to normal.

The resilience of Japan’s supply chains is tested again

By George Olcott in Tokyo, Japan, and Nick Oliver in Edinburgh, UK

Only five years after the devastation of the Tohoku Earthquake which caused a massive tsunami, the meltdown of the Fukushima nuclear plant and disrupted supply chains around the world, Japan has experienced another major earthquake. This time the quake was centred on the city of Kumamoto on Japan’s southern island of Kyushu. The force of the latest earthquake is equivalent to that of the 1995 Hanshin earthquake, which caused nearly 6000 deaths and devastated the city of Kobe.

Mercifully, the casualties from the latest earthquake are far fewer than the Hanshin or Tohoku earthquakes. However, questions are already being asked about the security and resilience of global supply chains.

Kyushu, like Tohoku, has a high concentration of industrial facilities, many of them vital links in the supply chain of key industries such as automotive and electronics. Many companies have already had to halt production at sites affected by the earthquake. Examples include:

  • Toyota, who have stopped production at some sites from at least 18-23 April.
  • Honda, who have suspended motorcycle production at their Kumamoto factory from 18-22 April.
  • Daihatsu have stopped production at their Oita and Kurume factories until 22 April.
  • Mitsubishi Motors have suspended production at their Okayama light vehicle plant until 20 April due to lack of parts.
  • Renesas, who have stopped production of semiconductors at their Kumamoto plant and are considering temporarily moving production to another location.
  • Sony have stopped production at their Kumamoto semiconductor factory. This will impact on the production of Sony digital cameras and smartphones

If previous disasters are anything to go by, we can expect a flurry of reports that dwell on the risks that just-in-time logistics pose for supply chain resilience, and how day-to-day efficiency comes at a price when disaster strikes.

Our research into how Japanese companies recovered from the Tohoku Earthquake, which so badly ruptured many supply chains, suggests a much more optimistic picture. We found that in 2011 an abundance of social capital (goodwill, essentially), both within and between firms led the much faster-than-expected recovery of the supply chain in 2011. The existence of strong ties between firms, not just between suppliers and clients but in some cases even between competitors, permitted a rapid, coordinated and focused deployment of resources that aided recovery. (See our California Management Review article on the 2011 earthquake here). Ironically, the very existence of tight, JIT logistics both fosters and requires the development of these close, cooperative relations.

Car industry says goodbye to the Saab brand

The Saab name will not appear on any vehicles produced by National Electric Vehicle Sweden (NEVS), the Chinese-led consortium that has owned the remaining assets of Saab Automobile since 2012, according to a report by Automotive News.

The rights to the Saab name are held by Saab AB, a Swedish Aerospace company. Saab AB sold 50% of its stake in Saab Auto to General Motors in 1989 and exited completely in 2000. General Motors sold Saab to Spyker in 2010, but within two years the company went bust and NEVS stepped in. However, Saab AB controls the use of the Saab brandname.

Since then there have been periodic reports that NEVS will produce electric vehicles based on the Saab 9-3, the most recent in December 2015 – see our post of 21 December 2015 on this.

There are precedents for Saab AB’s action. In 2000 BMW broke up the Rover Group, selling the now-defunct Rover Car Company to the Phoenix consortium and Landrover to Ford. However, BMW retained the rights to the Rover name. Rover went bust in 2005, and its assets were acquired by China’s Nanjing Auto, later absorbed by Shanghai Automotive.

Concerned that use of the Rover name in China might adversely affect its Landrover brand, Ford bought the Rover brand from BMW in 2006, forcing SAIC to develop an alternative brand, which emerged as “Roewe”.

 

roewe Rover logo

Rover…                                                                    …. and Roewe

95% of diesels exceed NOx limits

Which?, the journal of the UK Consumers’ Association (CA), reports that 95% of diesel cars it has tested recently, and 10% of petrol cars, emit more NOx than limits allow. The majority of petrol cars tested by the Consumers Association also failed to meet EU standards for emissions of carbon monoxide (CO).

The Association tests cars and other products in order to help its members with their purchasing decisions.

In the light of the VW emissions scandal, the CA revisited test data from over 300 cars they tested between 2012 and 2015. Under official test conditions, all the vehicles tested were certified as meeting the latest EU emissions standards. However, very few met these standards under the CA’s test conditions, which, the Association claims, are much closer to real-world driving conditions than are the official tests.

Key findings included:

  • 95% of diesel cars tested emitted more n (NOx) than official limits permit;
  • 10% of petrol cars emitted more NOx than limits allow and 65% emitted more CO2 than prescribed
  • Around 10% of vehicles tested were not even able to meet 1993 emissions standards.

The report lists nine diesel vehicles that were the worst offenders – these included Kyundai-Kia, Jeep, Land Rover, Nissan, Subaru and Volvo vehicles.

Petrol-engined vehicles that did not meet standards for NOx or CO included models from Alfa Romeo, BMW, Hyundai, Mercedes, Mini, Nissan, Porsche and Toyota/Lexus.

The CA has removed best-buy status from 23 Volkswagen Group cars as a consequence of the emissions scandal.

There is no suggestion that the latest findings stem from the use of defeat devices of the sort employed by VW. However, they demonstrate the widespread ‘gaming’ of emissions testing that occurs in the industry.

That car makers feel the need to engage in such activity provides further evidence of the competitive stress and strain in the auto industry – stress that is only likely to get worse if there is a slowdown in the global economy.

A full report can be found on the Which? website: www.which.co.uk

Cuckow, N. and Oliver, N, (2011) ‘Changing Patterns of Leanness: Stock Turns in the Japanese and Western Auto Industries 1975-2008’ (with N Cuckow). 18th EurOMA Conference, Cambridge UK, 3-6 July 2011.