In 2011, one of the largest earthquakes in history, known as the 2011 Tohoku earthquake, rocked the coast of Japan, followed by a devastating tsunami. Two years later, Japan is still facing the consequences of the earthquake and tsunami. Tohoku earthquake caused multiple explosions at a nuclear power facility, and had a profound impact on the global automotive industry.
Due to the earthquake and subsequent tsunami, Japanese auto manufacturers stopped their productions. They also stopped their production in US and EU. Everything was shutdown. This production stoppage led to loss of revenue which caused the shortage of parts and a great adverse impact on their financial performances. The top 3 Japanese car companies’ production loss was at least 25,000 units. The earthquake also strengthened yen which caused the car companies to lose their price competitiveness.
However, there were other kinds of impacts on the global auto industry. Due to the production cut by Japanese car companies, there were more growth opportunities for competing brands. Other foreign car brands became stronger, which led to a more competitive market. For example, Ford, Hyundai, and GM do not really depend on Japanese components, so they had an advantage in the market. The earthquake also urged car companies to develop more powertrain technologies in safer technology areas.
There were two different impacts of the 2011 Tohoku earthquake in the auto industry. However, everyone’s concern is the safety of Japanese citizens and helping them to recover from this catastrophe. Japan and its car makers are still challenged by this earthquake. I hope they recover soon.
The problems of 3/11 were followed by ones stemming from severe floods in Thailand, as Japanese firms had set up shop there before the rise of China as a production base.
Disruptions affected German and US firms as well. One semiconductor plant that made processors for automotive applications was severely damaged; it took months to transfer production to Singapore. Fortunately the plant was already scheduled to close, so preparations to transfer had begun before the quake. Otherwise things might have been much worse.
One effect is that car companies are insisting that their suppliers provide data on their suppliers, and even their suppliers’ suppliers – Tier I to Tier II to Tier III. That’s turning out to be timely, because it allows OEMs to track which suppliers in Europe might fail, and to develop contingency plans.
The earthquake though tragic, I think had a good impact on the auto-industry because it made companies aware that they should not put all their eggs in one basket. Meaning that all of their production and facilities were spread out more evenly instead of all concentrated in one area. I remember driving by Lexus lots seeing very very low inventory due to the impacts of the tsunami and earthquake.
I think the professor makes a great point about the growing interdependence of the auto industry. When looking at the auto bailouts in 2008, it was important to bail out GM and Chrysler not only to protect them but also their suppliers. If the suppliers went down it would have had a huge impact on the whole auto industry, not just the US. It works in reverse, an important supplier, like the semiconductor plant, “going down” can cripple an industry thousands of miles away.