Quake hampers production of cars, gadgets

The earthquake and tsunami that hit northeastern Japan could reduct the flow of cars and consumer goods out of Japan as factories suspend production.

Shutdown of facilities in northeastern Japan could impact global supply chain

Japan's economy is heavily dependent on the manufacturing sector, which accounts for just under 23 per cent of the country's gross domestic product. Key in that sector are automobiles and consumer electronics.

Wreckage of Toyota Yaris compact sedans intended for export to North America and destroyed by the March 11 earthquake at a port in Sendai, Japan. ((Koji Sasahara/Associated Press))

Several large firms have facilities in the northeastern part of the country that was devastated by the March 11 earthquake and tsunami. Companies like Toyota and Honda shut down factories after the quake. Honda might resume production later this week. Toyota says it will extend its shutdown until March 22 but will resume production on March 17 at factories that build parts for vehicles already on the road.

Other car companies — including Mazda, Nissan, Suzuki and Mitsubishi — also temporarily suspended operations, although their plants were not in the area hardest hit. Nissan says it will resume operations on March 17 — for as long as its inventory of parts lasts.

Toyota and Honda maintain production facilities in Canada. Toyota's plants in Cambridge, Ont., and Woodstock, Ont., produce the Corolla, Matrix, RAV4 and Lexus RX 350 models. The company says the plant continues to operate normally, although overtime has been cancelled for this week.

Honda builds a variety of Civic and Accura models at its Alliston, Ont., plant. Both companies rely on Japanese suppliers for a small fraction of the parts they use in Canada.

Analysts say the auto industry's global supply chain is so integrated that the loss of even one key supplier could have a major impact on production. Car companies normally maintain a 90-day inventory of product.

Other key factors that could affect the auto industry are the reliability of the supply of electricity to run the plants and whether the quake has a long-term affect on shipping infrastructure.

Japan's government has ordered rolling power cuts in an attempt to avoid widespread power failures in the wake of the damage to the Fukushima Daiichi nuclear power plant about 250 kilometres northeast of Tokyo. That damage has reduced by 25 per cent the power available to the Tokyo Electric Power Company. Long-term cuts to the power supply would further hamper manufacturers as they try to resume normal production.

Electronics manufacturers suspend operations

It's not just the car industry that's facing difficulties. Sony, Toshiba, Panasonic, Hitachi, Canon and Nikon have also suspended operations at some of their plants.

At Canon's Utsunomiya lens plant, 15 workers were injured during the earthquake. The company has suspended production there indefinitely. There were also injuries at Nikon's Sendai plant, which produces all of the company's professional-level digital SLR cameras. Production at that plant is also suspended indefinitely.

Hitachi reported damage to six of its plants. Among the products it produces are home appliances, auto parts and displays for hand-held Nintendo DS video games and LG phones.

Sony has reported damage to at least seven plants. It has also voluntarily ceased operations at others to help reduce the strain on the power grid. Sony's action affects the production of a wide range of products, including BluRay discs and semiconductor lasers.

Japan is also home to companies that produce the memory chips that power devices like smartphones, computers and tablets. Toshiba is the world's second-largest NAND flash memory chip producer. The company is a key supplier of chips used in Apple's iPhone and iPad.

Apple has delayed the launch of the iPad 2 in Japan — not, the company says, because of parts shortages but because the time is not right to introduce a new product as the country recovers from a disaster. The launch will go ahead on March 25 in 25 other countries, including Canada.