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Scenes from The University of Rhode Island

Earthquake could mean major shortage of some Japanese cars in U.S.

Media Contact: Dave Lavallee, 401-874-5862

URI expert says electronic chip exports could also be hindered

KINGSTON, R.I. – March 16, 2011 – American consumers thinking about buying a car made by Toyota, Nissan or Honda might want to make their decisions quickly.

That’s because work at Toyota, Nissan, Honda and other auto plants in Japan has been interrupted following the historic earthquake, resulting in a loss of 10,000 vehicles per day for Toyota alone. Douglas N. Hales, associate professor of supply chain management at the University of Rhode Island’s College of Business Administration, said such interruptions will slow production of some models in the United States and around the world.

The URI professor is in Le Havre, France doing research at its port until next week. Shortly after the earthquake, he switched his focus to examining the effects of the Japanese earthquake on French businesses.

Hales said that even more critical to the companies’ plants in the U.S. would be the loss of some key components that are only made in Japan, which could slow production here.

For the short term, Japanese auto manufacturers have enough inventory in the United States, Hales said, adding that “precisely how much Toyota stock is
held in the U.S. is a trade secret, but it is estimated at 10 to 20 days for key parts.”

One of the biggest concerns for Japanese businesses now is electric power because the emphasis is on providing power to individual homes.

If it has to, Toyota can shift its supply chain to support production at any of its plants around the world in about 90 days. “The company is among the best in the world at this,” Hales said.

“Also, high-tech chips for computer memory and cell phone technology that are sole-sourced in Japan could run short, which will stop U.S. plants as well,” Hales said. “Again, how much stock American plants have on the shelves is not publicly shared.

“On a more strategic note, Japan has just fallen to third place as the world's largest economy, now following China,” Hales said. “My best estimate places the Japanese Gross Domestic Product loss, through its supply chain, of this earthquake to be about 7 percent.”

Hales said Japanese restaurants in the U.S. that buy products from Japan will begin to run out of those ingredients in 15 to 20 days. Because there is a serious food shortage in the affected areas, Japan has virtually stopped all food exports for now, he said.

Hales said the French are worried about the quake’s effects because the country exports more to Japan than it imports.