Suppliers call emergency meeting to discuss resin shortage
DETROIT -- Auto suppliers are preparing to address a "severe" shortage of a key type of resin with an emergency summit Tuesday in the Detroit area.
The shortage of the PA-12 resin -- used to make auto parts such as fuel tanks, brake components and seat fabrics -- stems from a fatal March 31 explosion at a plant in Germany owned by Evonik Industries AG. Two employees died in the blast.
As many as 200 industry officials are expected to attend the meeting at a hotel in suburban Detroit, said Neil De Koker, CEO of the trade group Original Equipment Suppliers Association.
The meeting was originally scheduled to take place at the Automotive Industry Action Group's suburban Detroit headquarters, but has been moved to another location due to capacity constraints.
In a letter to customers last week, William Kozyra, chairman of TI Automotive Ltd. described the shortage as "severe."
"The shortage is real and immediate," the letter said. "The possibility of production interruptions at some of facilities in the next few weeks is high."
Evonik's plant was one of the largest producers of PA-12 in the world and suppliers are expecting interruptions as they seek out alternative sourcing, Cooper-Standard Automotive Inc. said in an e-mailed statement.
"We are working closely with our customers and suppliers to identify alternative solutions to minimize or avoid any impact," the supplier said in the statement.
However, as automakers work with its supply base, there are no immediate plans to curb production, Mike Goss, a spokesman for Toyota Motor Engineering & Manufacturing North America Inc., said in a statement today.
"The material provided by Evonik is in our North American supply chain but until we complete an assessment with our suppliers, the impact is unknown," he said. "At this time there is no need to adjust production, and we will continue to work closely with our suppliers to ensure ongoing production."
DuPont Automotive, which operates its North American automotive coatings business in Mt. Clemens, Mich., is fielding calls from automakers and suppliers on alternative resins, said Carole Davies, marketing communications programs manager for DuPont.
"We don't make PA-12, but we do have materials that we think may be used in similar materials," she said. "We're working with customers to see if we can alleviate some of the pressure (caused by the shortage)."
This incident mirrors the result of the March 2011 earthquake and tsunami in Japan that created shortages across the supply chain and a fire during the same month at Magna International Inc.'s Howell interiors plant.
Jay Baron, CEO of the Center for Automotive Research, said the shortages over the past 13 months demonstrate that the industry needs further evaluation of its supply chain capabilities.
"This is the third major disruption within about a year's time and a situation that should force more consideration to evaluate the depth of the supply chain and its robustness," he said.
Ube Industries Ltd., Asia's largest producer of PA-12, also said order inquiries have risen.
Already at full capacity
"We've received some requests from customers for more PA-12 production, but there is no room for us to produce more because we are already running at full capacity," Koji Sumiyoshi, a spokesman at Japan-based Ube, said in an interview today. "A shortage of supply will happen."
Ube supplies about 10 percent of the global PA-12 market, which typically amounts to about 100,000 tons a year, he said. Ube's production of the resin trails behind Evonik, France's Arkema SA and Switzerland's EMS, he said.
While global carmakers may be able to make preliminary assessments this week on whether a resin shortage would disrupt auto production, their experiences with last year's earthquake and tsunami in Japan and flooding in Thailand may help them deal with the situation, Deutsche Bank AG analyst Rod Lache wrote on Sunday.
Nissan Motor Co. also said today it is assessing the situation. Spokesmen at General Motors Co., Ford Motor Co. and Chrysler Group LLC said late last week the companies were investigating the matter.
Hyundai Mobis, the main auto-parts supplier to South Korea's Hyundai Motor Co., said in an e-mail it hasn't been affected.
Interior components suppliers Johnson Controls Inc. and Lear Corp. don't directly use PA-12, but are evaluating the affects of a shortage.
"We don't use this resin directly," Lear spokesman Mel Stephens said in an e-mail. "We are in the process of trying to evaluate any indirect impacts, if any."
Bloomberg contributed to this report.