Thursday, April 7, 2011

Auto parts supply chain woes

KUALA LUMPUR: The disruption to the automotive industry supply chain caused by Japan’s earthquake and tsunami could be more serious than expected for local players.

It is learnt that given the seriousness of the situation, officials from Japan’s Daihatsu Motor Co will meet with its component vendors for Perusahaan Otomobil Kedua Sdn Bhd (Perodua) next week to explain the implications of possible supply disruption and provide an update on the scenario ahead.

Meanwhile, industry sources said Perodua would be briefing some of its dealers today that it would possibly delay the launch of its replacement model for the Myvi.

Proton Holdings Bhd’s newest model, Inspira, could be among those that are affected most considering that over 50% of the car’s parts are from Japan.

However, an analyst pointed out that Proton should have a buffer of about two to three months’ inventory of parts as sales of the Inspira have not met its target of 1,600 units a month.

“Bar the month when it was first launched, sales of the Inspira have been below 1,000 units a month,” said the analyst, adding that Proton should not be adversely affected by any disruptions from Japan in the in the immediate future.

Industry sources said local auto makers were already facing disruption on the supply of auto parts from Japan.

RHB Research Institute had highlighted that although more components were being sourced from plants within Asean, “certain higher-value parts could still be sourced ultimately from Japan that could see supply constraints arising from infrastructure-related bottlenecks”.  It added that completely built-up (CBU) vehicles could also see some disruption, which could affect the sales of UMW’s Lexus and Toyota Prius Hybrid, as well as DRB-Hicom Bhd’s Honda Insight Hybrid.

The supply chain disruption has become a global issue and the impact felt worldwide. Already in Europe, some car assembly plants, for instance Honda, have put forward their downtime due to shortage of auto parts.

Dow Jones reported that Honda Motor Co warned that production levels in the UK would halve from April 11 as a result of supply chain disruptions at parts suppliers in Japan.

“We still don’t know the full extent of what can be done to substitute the affected parts,” Honda spokeswoman Natsuo Asanuma told the media.

Toyota, the world’s largest automaker, currently has three plants in operation in Japan, it did not know when it could restart 16 idle plants.

Spokeswoman Shiori Hashimoto denied a news report that Toyota would restart most of its assembly plants in Japan as early as next week. “It is not so optimistic at this moment,” she said.

Toyota said it would be forced to slow production at some US plants due to a shortage of parts from Japan.

Both Moody’s and Standard & Poor’s have downgraded Toyota’s credit rating after the disaster.

Japanese companies are not only reeling from damage to factories and suppliers in quake-hit northeastern Japan, but are also suffering from fuel shortages and power outages in the Tokyo area.

Adding to the problem is the just-in-time inventory policy that many in the auto-related industry have adopted to enhance cost efficiency and fast stock turnover.

“Most in the industry do not keep large stocks. The disruption to the supply chain, which was not expected, could deal a big blow to them,” said an industry source.

In a research note, AmResearch wrote that the Myvi replacement model launch could potentially be delayed (as) parts supply ramp-up for the Myvi replacement, which was supposed to commence in May, has been cancelled.

“As compensation, orders for parts for the existing Myvi model will be increased - this suggests that the new Myvi launch date could be some time away,” it said, adding that the cause of the delay was still unclear.

According to AmResearch, the Myvi replacement model was scheduled to be launched by end of this month.

“Our checks with UMW Holdings Bhd suggest that the so-called Myvi replacement will instead be launched in 2H11 as an entirely new model,” it said.

AmResearch reckons the supply disruption may put pressure on the auto stocks. However, it noted that any weakness in share price from knee-jerk reactions to the new Myvi delay “should create a good opportunity to accumulate APM (Automotive Holdings Bhd)”.
After reading the news publish on Thursday, 07, April 2011 by The Edge I really had a good laugh and was wondering that why this kind of problem can happen to our 1Malaysia, ETP and Malaysia Boleh slogan. In fact, after so many years of experience in the so call automotive manufacturing we should not be affected by this kind of problems. We should be standing on our own feet. (Comparing to Hyundai, Kia & Ssangyong of South Korea and TATA in India, they are much more successful that us) Why????????????
There is a chinese saying, borrowing others buttock to be your make face.

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