Auto industry takes stock in wake of catastrophe

The earthquake-tsunami disaster in Japan has caused significant problems for automobile manufacturers that import parts from Japan, but the impact will likely be minimal in the Czech Republic, where the auto industry is fairly self-contained, and could even lead to more opportunities for parts manufacturers outside of Japan.

"The impact on the Czech automotive sector is rather limited and will not lead to automotive plants' production suspension or attenuation," said Milan Kočka, a partner at Ernst & Young, adding that almost all Japanese plants were up and running, though there were still some potential problems with power supply to keep them producing at full capacity.

"Czech automotive producers that use parts from Japan have sufficient supplies to maintain the planned production, and this will, together with Japan's quick recovery ability, secure smooth operation," he said.

The global impact, however, has been more serious. Although production that had been drastically cut in some countries is slowly starting back up as Japan recovers, about 13 percent of global "light-vehicle production" has "idled," according to Kočka, which could lead to significant drops in profits this year.

In the United Kingdom, Honda cut production in half, while Opel cut some of its work shifts after the disaster. France's PSA Peugeot Citroen had to slow production, though its partner in Slovakia resumed full operation April 7, and Renault cut production around 20 percent. Toyota Motor Corporation and its subsidiaries, and potentially Honda and Nissan, are being eyed by ratings agencies for potential decreases in their bond ratings because of the impact on production in Japan. German companies Daimler, BMW and Volkswagen could see a drop in profits of 22 percent to 30 percent, according to a Commerzbank report.

Domestically, almost 100 percent of auto manufacturing comes from Škoda Auto, Hyundai and Toyota Peugeot Citroen Automobile (TPCA), the joint-production venture between Toyota Motor Corporation and PSA Peugeot Citroen in the Czech Republic. So far, all three companies have denied any impact from the parts shortage in Japan, but if the situation worsens or continues much longer, there will be "problems in the supply of certain parts within a few weeks," said Cyrrus brokerage firm automotive analyst Jan Roh, citing media and company reports.

There is a possibility of "short-term market redistribution" caused by shortages of certain automobile makes, Kočka said, but added it is unlikely production issues "will cause any significant changes in sales or market shares in the long-term." However, there is potential for a longer-term shift in parts suppliers.

"We assume automotive companies will more actively seek and secure alternative component suppliers with sufficient capacity in the future and develop emergency scenarios for similar situations," Kočka said, which could "bring new opportunities and open new markets for highly competitive local suppliers."

That, however, could be limited by companies wanting to "keep long-term relationships with indigenous suppliers," Roh said.

Škoda Auto has said its production will not be affected, though a report in the weekly Týden cited an anonymous source in the company who said Škoda was having difficulties locating a special chip for the air-conditioning system. A Škoda spokesman who declined to comment for this article told Týden that the Volkswagen Group, which owns Škoda, has no problem getting parts and had suppliers all over the world, and was working to "ensure the group-wide supply chain."

TPCA has said although it hasn't had any supply issues yet - because most of its suppliers are in the Czech Republic - the company could face difficulties if shortages continue.

"We are in close contact with our suppliers because the potential risk might be with the sub-suppliers of our suppliers," said TPCA spokesman Radek Kňava. "Currently, we have confirmation of supplies for the next few weeks. What is mainly affected is our small electronic parts."

Hyundai spokeswoman Hana Holcová said the company has no problems related to the situation in Japan.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com