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40 Japanese auto suppliers in difficulty, Nissan CEO says

Nissan Motor Co. Chief Executive Officer Carlos Ghosn said about 40 component suppliers in Japan remain in difficulty after the nation’s record earthquake, complicating automakers’ efforts to restart car production.

Electronic components, plastics and rubber are in short supply and will affect Japanese automakers and rivals outside the country, Ghosn, 57, said in a telephone interview. Carmakers are jointly offering stricken component-makers support via Japan’s automobile manufacturers association, he said.

“This is serious and it’s still difficult to evaluate,” Ghosn said late Wednesday. “You have the earthquake, you have the tsunami, rolling blackouts, and fuel shortages hitting at the same time, and they aren’t only hitting the car manufacturers, but also the suppliers and the dealers.”

Nissan, Toyota Motor Corp. and Honda Motor Co. are struggling to resume domestic production following the magnitude-9.0 earthquake on March 11 killed more than 9,400 people and damaged factories. The nation is also facing electricity shortages after a nuclear-power plant was crippled and disruption to road and rail networks. Nissan declined to name the 40 suppliers.

“Once automakers confirm that they have all the necessary parts, they will start and will be quick to catch up,” said Takeshi Miyao, an analyst at Carnorama in Tokyo. “Still the impact on their production could be about 5 percent down.”

Automakers in Japan built about 9.63 vehicles in 2010, according to the industry association.

It will take Yokohama-based Nissan until mid-April to resume major production at its plant in Iwaki, Fukushima prefecture, Ghosn said. Nissan’s other Japanese production sites are now operating and undamaged, he said.

“I can tell you that we have a pretty good assessment of the situation of the company itself,” Ghosn said. “We are getting more confident every day.”
Carlos Ghosn, chief executive officer of Renault SA. (Bloomberg)
Carlos Ghosn, chief executive officer of Renault SA. (Bloomberg)

Nissan shares fell 2.9 percent to 703 yen in Tokyo yesterday. The stock has lost 14 percent since March 10, the day before the quake.

Japanese automakers including Nissan will probably have a “tough” time during the quarter beginning April 1, he said. The financial impact from the plant closures will be minimal in the fiscal year ending March 31, Ghosn said.

Nissan’s engine factory in Iwaki, located in the same prefecture where Tokyo Electric Power Co. workers are battling to avert a nuclear meltdown, aren’t getting enough water, electricity and gas to operate, Toshitake Inoshita, a Nissan spokesman, said this week.

The carmaker is considering shipping engines from Tennessee to Japan, Nissan has said. The factory makes engines for vehicles including Infiniti sedans and Elgrand minivans.

“It will take some time at Iwaki to recover,” said Ghosn, who plans to visit the plant soon.

Ghosn, who also leads France’s Renault SA, was in Paris attending an executive committee meeting on March 11.

Rival PSA Peugeot Citroen, Europe’s second-biggest automaker, said production of some models will fall by as much as 60 percent because of a shortage of diesel-engine parts resulting from the Japan earthquake.

Existing stocks of the part, supplied by Hitachi Ltd., will be used to maintain current production rates of priority models including the Peugeot 508 mid-sized car and Citroen DS4 upscale sedan, spokesman Pierre-Olivier Salmon said. Output at other plants in France, Spain and Slovakia will slow by up to 60 percent, he said.

Nissan set up an emergency center in Yokohama “within hours” of the temblor off the coast of Sendai, northern Japan, Ghosn said. The center includes 100 employees, including top management, who monitor Japanese plants on an hourly basis.

Nissan resumed operations at six factories on March 21 with some vehicle assembly due to restart today, the company said March 20.

Ghosn said the company has no plans to shift production to other countries. Nissan is planning to build more than 1 million cars in Japan and “this will not change,” he said. (Bloomberg)