North American suppliers -- even those that appear to have little exposure to Japan's automakers or suppliers -- are poring over contingency plans and preparing to take a hit.
ZF Group North America, a German axle supplier to Mercedes-Benz, BMW and Ford Motor Co. in the United States, has drawn up contingency plans to halt U.S. factory production if necessary -- not because of its own exposure to Japan, but in case another supplier to the BMW X3, Mercedes M class or Ford Taurus can't deliver a part.
"We are an in-sequence supplier," says ZF spokesman Bryan Johnson. "Our schedule is at the mercy of our customers. If they stop, we stop."
A survey by the Original Equipment Suppliers Association of its members conducted March 21-31 and released last week found that almost half of the North American respondents already have had production schedules reduced as a result of the earthquake. Two-thirds of those who haven't seen schedules cut yet said they expect to see output reductions over the next month and a half.
The survey found that 78 percent of the respondents identified content of one form or another that comes from Japan. And 63 percent said no assurances had been received from Japanese suppliers that they can meet current delivery requirements.
The reach of the Japanese industry into all aspects of the world industry is becoming clearer by the day. Last week, despite earlier General Motors' assertions that its exposure to the Japan crisis would be minor, GM Vice Chairman Steve Girsky shuttled to Japan to meet with suppliers and tell the Japanese press that GM is pledging materials and personnel to help its Japanese suppliers recover. Chrysler Group trimmed North American car output.
The central problem across the industry is a frustrating list of unknowns. Despite weeks of inspecting their supply chains, suppliers and automakers still don't know who is unable to operate as a result of the tragedy in Japan.
The problem isn't confined to any particular parts sector. The crisis has knocked out a large amount of Japanese electronic parts. But in a memo to its U.S. retailers last week, Toyota Motor Sales U.S.A. warned of a long list of service parts that will be in short supply for the foreseeable future.
The listed items went well beyond electronics, including shock absorbers, mud guards, steering wheel covers and mounting brackets.
At UGN Inc. in Chicago, a Swiss-Japanese joint venture maker of acoustic parts and interior trim pieces for several automakers, CEO Peter Anthony says his teams are preparing for a summer of production shutdowns.
Getting material from Japan is not an issue for him right now. His biggest worries: how to keep employees at six North American plants occupied for an undetermined amount of customer downtime, whether to let go of temporary workers and whether to cut back on planned 2011 spending.
"We're preparing for trouble," he says. "This will be something that goes on well into the summer."