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The Ripple Effect of Japan’s Tsunami

The terrible earthquake and tsunami last month in Japan will have an obvious effect on the new car market; many vehicles that were ready for export from Japan have been swept into the sea or destroyed in the storage yards, many days production were lost from plants in the immediate area and some factories have suffered damage that will effect production in the short to medium term.

Not all cars that are badged as Japanese brands are made in Japan, however: more than 80% of Honda products sold in the U.S. are made in North America, from components that are sourced in the region. Nissan assemble many of their vehicles close to market and hold considerable stocks of components in-country so they foresee no major supply issues to customers and dealers.

Perhaps surprising to many people there have been impacts outside the Japanese brands amongst the marques normally associated with US and European badges: General Motors have had to cut production in the US, Europe and Korea simply because their plants there rely so heavily on imported Japanese-manufactured components. Volvo, Renault, Daimler and BMW all saw the cessation of parts coming from Japanaffect their own production schedules outside the immediately effected earthquake/tsunami zone.

These facts notwithstanding it is unlikely that the horrors inflicted on Japan by mother nature will actually have much noticeable effect on the currently sluggish car market, either new or used.

The ripple effect went upstream too as organisations such as GKN and Autoliv Inc who found that their Japanese customers such as Mitsubishi, Mazda and Toyota were having to halt production due to tsunami damage and therefore not take in orders that were in the pipeline.

It is too soon to speculate with any degree of confidence but the longer term effects of the earthquake and the subsequent tsunami may spread wider.  The political requirement for stability and reconstruction notwithstanding, it may be felt prudent to avoid putting too much reliance in the future on such a geologically unstable area.  Suppliers and customers alike may find the effect of this disruption, on top of their current credit-crunch-economic-difficulties is too hard to bear.

Reported in the press and ABC News in early April is a vastisland of post-tsunami debris, including thousands of motor vehicles, floating in mid-Pacific and slowly movingeastwards.  This debris field is large enough and dense enough to have been declared, by the US 7th Fleet, to be a hazard to shipping.  If it keeps moving eastwards it will ultimately become a potential environmental hazard to the densely populated West Coast communities of the US.

The tsunami has caused great loss of life and livelihood in the home nation of Japan, and the aftermath, especially withregard to the nuclear power industry, will be felt there for many years. The effects however have also been felt with some force in other nations, both developed and emerging and this really highlights the fact that we do live in a“global-village” and events thousands of miles distant from our shores really do have an effect that can be felt here today and also tomorrow.

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