Sigh. Just when the auto industry was poised for a breakout year, the start of a boom even, we get soaring fuel prices and parts shortages shutting assembly plants.
Outside the quake zone -- and let’s recognize that for the people, ports and auto plants in northeastern Japan, the earthquake/tsunami/radiation combo is about as bad as it gets -- these problems are manageable.
Inside America, for the people and companies that fought through and survived the past three years, the challenges of higher pump prices and restoring the flow of parts are doable tasks. Not a crisis. Not a catastrophe. They’re more … irksome.
Yes, the U.S. auto industry can cope. But there are costs, trade-offs and consequences.
Near-term, Detroit, Korean and European automakers get a market share boost -- soon lots of folks either won’t find the Japanese car they want, or won’t find a deal.
Longer term, $4- to $5-a-gallon gasoline hastens the shift to smaller cars. Lots more of those are hitting the market, but many still are Japanese models. Last year’s 30-mpg highway sweet spot is this year’s 40 mpg.
Globally, parts shortages will cut auto production this year: fewer auto production jobs, lower earnings for automakers and suppliers, and a drag on the U.S. recovery.
Rising fuel prices justify automakers paying more to cut vehicle weight and increase fuel economy. That benefits tech companies, alloy makers and innovators. Maybe it even means a lower rate of infant mortality among EV startups.
The situation in Japan is forcing a strategic rethink of global sourcing.
Into the plethora of factors, mix in a fresh bias toward local production and against long component pipelines. That hurts Japanese, Chinese and Indian suppliers and helps North American and European suppliers in their home markets. But it adds pressure on suppliers to build parts plants in every production center.
Planners may put more emphasis on decentralized production and less on manufacturing clusters and efficiencies of scale.
Also add a bigger bias against single-sourcing, with Merck’s Japanese pigment plant as the stark example.
Some automakers may place a greater premium on owning technology and reducing exposure to suppliers. If parts in shortest supply are rationed, some automakers may even try to inch upward on key suppliers’ priority lists.
For U.S. dealers, spot shortages of popular vehicles will translate into good per-vehicle margins, but lower new-car volume (and the accompanying drag on service volume), renewed emphasis on used vehicles -- and a lot of hard work conquest-selling and switching customers out of first-choice rides.
Yeah, we’re out of Corollas, but this Avalon gets great mileage -- and you sit up high in this Tacoma.
Even at the macro-economic level, the parts-fuel twins hurt. Auto sales are more in-line with than leading the U.S. recovery. The U.S. gross national product and unemployment indexes take small but measurable hits.
In January, 2011 was looking like the first of the fat years in the business cycle. Now, maybe the really, really good times don’t start to roll until 2012.