What to do when the plant blows up

When Takata Corp.'s airbag plant in Mexico blew up in late March, it set off a supply-chain reaction that illustrates the sophisticated problem-solving capability of the auto industry.

It seems remarkable that such an event didn't disrupt production for any of Takata's customers.

The company supplies Honda Motor Co., General Motors, Ford Motor Co., Nissan Motor Co., Toyota Motor Corp. and DaimlerChrysler.

Storms, accidents, financial crises, political unrest and labor problems can all lead to parts disruptions. But, in reality, such shutdowns are rare even in this age of just-in-time parts delivery.

The industry -- the manufacturers' purchasing departments and their supplier networks -- has become adept at solving problems. But it must become even more adept at crisis management as the size and scope of the problems change in the years ahead.

The use of business-continuity plans is industrywide, and it's evolving.

All for one … customer

It might not be entirely altruistic, but this industry sticks together -- even when that means tacit assistance to a competitor.

"I do believe the industry comes to the rescue when there is a crisis," says Neil De Koker, president of the Original Equipment Manufacturers Association. "Typically, this is done more to support the customer than it is to help a competitor."

In the Takata case, the supplier worked with customer Ford Motor, competitor Autoliv Inc. and other companies to ensure that parts deliveries would continue while the plant was repaired. Working with its partners, Takata resumed full operations at the plant in a month.

"We were successful because Takata had a good business-continuity plan," says Bill Storves, Ford's supply chain manager for North America.

Wanda Jackson-Davis, Ford's purchasing manager for restraints in North America, says Autoliv substantially increased its inflater production during the down period.

TRW Automotive Inc. also was prepared to help, but its assistance wasn't required.

"That's the point," Jackson-Davis says. "You have a competitor step up to help a customer."

Such problems can occur in the supply base anywhere in the world.

In 1997, a fire wiped out an Aisin Seiki Co. brake parts plant in central Japan. Customer Toyota went to more than 20 alternative suppliers, inside and outside the Toyota Group, to line up sources for clutch master cylinders for manual-transmission cars, brake master cylinders and proportioning valves.

Toyota lost about a day of production; but without the cooperation of the supply base, it could have lost many more days or weeks of production.

Solving such problems in the future won't get easier. As cars and trucks are built with highly complex electronics and technology, suppliers must develop even more extensive backup plans.

As an example, there was a potentially catastrophic shortage of computer chips in January that threatened many of the world's automakers.

Tainted chips

Freescale Semiconductor Inc., the world's largest producer of automotive computer chips, could not deliver tainted chips to suppliers that make antilock brakes, seats and engine control units.

Freescale supplies GM, Ford, DaimlerChrysler, Toyota, Honda, Volkswagen, Peugeot, Renault and 30 major electronics suppliers.

A luxury vehicle might contain 100 computer chips. A typical vehicle today carries $270 worth of chips. Over the next five years, that content is expected to increase to $340.

The chip crisis could have forced GM to halt production of its redesigned full-sized SUVs, plus the Buick Lucerne, Cadillac DTS, and Chevrolet Monte Carlo and Impala cars.

In the end, a global top-priority effort by GM, other automakers and suppliers averted production shutdowns because of the chip shortage.

But the lesson from this and other crises is loud and clear: It's going to happen again, and suppliers had better be ready -- again.

You may e-mail Philip Nussel at [email protected]