Power Plant Damage May Slow Earthquake Recovery for Japan's Automakers

Located on an active fault line and with a long earthquake history, Japan was probably better prepared than most of the rest of the world to withstand a major shock. But even the country's strong building codes and emergency preparedness were unable to contain the effects of both a massive tsunami and the largest earthquake ever to hit the island. The country's nuclear power industry, which supplies 30 percent of the national grid, was heavily affected, and that's going to ripple through the entire industrial base.

Quick assurances
Japan's central bank was swift to act, setting up an emergency task force and pledging to maintain liquidity, but recovery is likely to be hampered by the closing of power plants, transportation (including roads and the Shinkasen high-speed rail lines near the coastal epicenter) and the port facilities vital for an export-oriented economy.

Japan gets 20 percent of the world's earthquakes above six on the Richter scale. This earthquake reached 8.9, and was centered near the city of Sendai in the northeast. The area is a center of auto production, and numerous auto plants -- from Toyota, Nissan, Honda and Subaru -- are among those closed.

According to Melissa Lafsky, editor of the micro news site Infrastructurist.com in an interview, "The power plants are one of the big issues, because rebuilding them is incredibly expensive and time-consuming, and the loss of available power obviously is a huge problem, too."

Recovery in the nuclear sector is critical, and it may be a few days until damage can be fully assessed. The Tohoku Electric Power Company shut three reactors at the Onagawa power plant, and Tokyo Electric Power closed seven units at two plants. Some 5,800 residents living near the Fukushima nuclear plant were told to evacuate, and a turbine fire was reported at the Onagawa nuclear plant in Miyagi prefecture, one of the areas worst hit by the tsunami. A state of nuclear power emergency has been declared, though no radiation leaks have been reported.

The Japanese economy also runs on oil, and numerous refineries have been closed -- Cosmo Oil reports a fire in storage tanks at its now-shuttered Chiba unit. Also reported closed are Tokyo Bay ports, location of important liquefied natural gas shipping terminals. Japan is the world's biggest importer of LNG, and has sought to diversify its energy supply from oil dependence.

Auto industry affected by infrastructure closings
The auto industry reports some plant damage, but its ability to restore normal operations may be more affected by power supply disruptions, port closings and road outages than other factors. Toyota spokesman Wade Hoyt said that "initial indications are that none of our plants have sustained major damage. Most are inland where no tsunami can reach them."

A dispatch from Toyota (TY) said:

The employees at manufacturing companies in the Tohoku region, including Toyota Motor Tohoku, and Central Motor Corporation are evacuating to safe areas. The situation is the same in the facilities at Hokkaido as well. Currently, we are checking the situation of suppliers. Currently nothing has been decided about production plans.

Honda, which closed two factories, suffered one death and 30 injuries when a wall collapsed at a research center in Tochigi prefecture. Fuji Heavy Industries, which makes Subarus, closed five factories. Nissan also reported two injuries, and closed four plants.

Toyota assured the world at press time that all its major plants are back in operation, though the four subsidiary plants which make make transmissions and other components, as well as the Yaris) will remain closed for the time being. "We are also currently assessing the situation at our suppliers, dealers and the impact on North American import vehicles," it said. "Toyota's number one priority is to support our employees at TMC, our partner companies, suppliers and dealers through this situation."

Related:

• Japan Earthquake: Economic and Market Impact