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Why Detroit Automakers -- and U.S. Consumers -- Will Suffer From Japan's Earthquake

The Japanese earthquake and tsunami aren't simply a problem for Japanese carmakers -- American auto companies use a lot of Japanese parts, and interruptions in the supply chain are beginning to slow down or shut down production in the U.S. Many domestic carmakers are able to access stockpiled inventory and parts that were en route from Japan before the earthquake. Beyond that the picture is cloudy, but it could result in higher car prices across the board.

Green cars at risk
The building trend is dramatically illustrated in new green cars, including the newly emergent, made-in-the-U.S.A. Chevy Volt, which faces a production slowdown because of Japan-sourced electric motors. Ford's (F) hybrids could be at risk, too. The ripple effect from the Japanese quake is affecting businesses far and wide, and despite assurances from many quarters it's moving very fast.

As Asian carmakers build factories in the U.S., in part to meet domestic content requirements, some American companies have gone the other way -- sourcing parts and EV-related components abroad, usually because they're cheaper there. That practice sometimes upsets patriots who want to wave the flag for American companies, and it's now coming back to haunt the Big Three, which have a vulnerability to interruptions in far-reaching supply lines.

Volt's motors are from Japan
According to Volt line director Tony Posawatz in an email:

The Volt uses electric motors from Hitachi produced in Japan.... We have inventory in the pipeline. Too early to fully assess impact.
Hitachi Automotive Systems' Mary Ann Enosara told me that the companies' plants are currently operating on a "very limited schedule, just two or three days a week." Hitachi has five factories in Ibaraki Prefecture, north of Tokyo, that were damaged by the quake, according to International Construction magazine. Access to electricity is a major concern going forward.

GM also said Thursday that it would shut down production at a Louisiana assembly plant that makes Chevy and GMC pickup trucks, because even these quintessentially American products have unspecified Japanese content.

Jalopnik quotes a Japanese battery supplier source as saying that production of the Ford Fusion and Escape hybrids in the U.S. are likely to be impacted because of the cars' Sanyo-sourced battery packs. The hybrids' continuously variable transmissions are also Japan-sourced, from Jatco. Ford said it isn't seeing any parts shortages "at this point."

As supplies of Japanese-built cars dwindle, the prices on those remaining are likely to go up, says car price tracker And exactly that same effect could raise prices for domestically produced cars in short supply because of parts problems.


Photo: Flickr/LT Mayers
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