Earthquake's Effects Rattle Japanese Automakers

Earthquake's Effects Rattle Japanese Automakers
Earthquake's Effects Rattle Japanese Automakers

Automakers and other manufacturers in Japan are shutting down plants temporarily as they await news of the fate of several crippled nuclear power plants, which are causing electricity shortages in the Asian nation.

Toyota Motor (TM), the world's largest automaker, has suspended all production in Japan until Wednesday in the wake of the massive 9.0 earthquake and tsunami that struck the northeast part of the country Friday. The shutdown, which began Monday, is expected to reduce Toyota's output at its 12 factories in Japan by about 40,000 vehicles, Reuters reported. In January, Toyota produced about 234,000 vehicles at its Japanese plants.

Nissan Motors (NSANY) and Honda Motor (HMC), Japan's second- and third-largest car manufacturers, respectively, are also shuttering plants. Reuters reported Monday that Honda will suspend production until Sunday because of the quake. Nissan is halting production at two plants north of Tokyo and close to the hardest-hit region in the northern part of Honshu, Japan's most populous island, until Friday, The Detroit News reported. Operations at four other plants have been suspended until Wednesday.

Parts Shortages, Infrastructure Issues

Smaller manufacturers, including Mazda Motor, have had to suspend production because of parts shortages, even though the company has no plants in the stricken region.

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"We have yet to hear of any major damage to production facilities," Deutsche Bank auto analyst Kurt Sanger told The Detroit News. "The larger question is likely disruption to the supply chain."

How badly the natural disaster will affect Japan's output of automobiles and other products remains unclear. Last year, the country produced 9.6 million vehicles, with about half exported to foreign markets.

The earthquake and tsunami damaged parts factories, rail lines and other transportation infrastructure, making it much more difficult to get material where it's needed.

Still, the News noted that the quake has had no immediate impact on Japanese automakers' U.S. operations, which have enough inventory for two months of sales.

Nervous Nikkei

On Sunday, electronics-maker Sony (SNE) said it had closed its technology center in the northeastern city of Sendai because of damage caused by the quake. Sony also temporarily closed six other electronic component and equipment plants elsewhere in the country.

The shutdowns have sent share prices on the Tokyo Stock Exchange spiraling downward. In Tuesday's trading session, Sony shares fell nearly 9%, following steeper market losses, Reuters reported. Shares of Toyota fell more than 7%.

Declines in Japanese and other Asian stock markets accelerated after the Kyodo news agency quoted the Tokyo metropolitan government as saying that "minute levels" of radiation have been detected in the Japanese capital, The New York Times reported.

"People have gotten very nervous," Tohru Sasaki, a foreign exchange strategist at JPMorgan Chase (JPM), told The New York Times. "We don't know if we'll be able to make it to work tomorrow."

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