How Toyota applied the lessons of 2011 quake

TOKYO -- Even as aftershocks rumbled in Japan last week, Toyota and its suppliers leapt to action to retrieve critical molds from an earthquake-stricken supplier factory and order substitute parts from China.

One distressed Toyota supplier contracted a nearby competitor to produce parts on its behalf until the disaster-rattled company could get its own operations back online.

The quick reflexes of Aisin Seiki, one of the world's top parts makers, largely helped its No. 1 customer pass the biggest test of crisis control since a devastating Japanese earthquake and tsunami in 2011 knocked the country's auto industry out of commission for months, sending ripples across the U.S. auto market.

Like all of Japan's automakers, Toyota has spent the five years since the March 2011 disaster strengthening itself for the next crisis. And when it hit this month, Toyota's preparation largely paid off.

"They are running by their playbook: Stop, assess and proceed," said Kurt Sanger, lead auto analyst with Deutsche Securities Japan. "It seems like an affirmation of their processes."

After the twin temblors of April 14 and 16, Toyota Motor Corp. initially suspended nearly all production in Japan.

But within days of that decision, it bounced back with plans to bring the plants online starting Monday, April 25. Most will be restored to full production by Thursday, April 28. For some factories, the shutdown will amount to as little as five days.

The stoppage likely will cost Toyota hundreds of millions of dollars and perhaps around 100,000 units of lost production.

Bob Carter, senior vice president of automotive operations for Toyota Motor Sales U.S.A., said plants in Japan building Lexus and Prius models for the U.S. will resume production on Monday, April 25.

"It sounds to me like we are in good shape," Carter said, adding that there is no known disruption to North American production.

The hit could have been worse had Toyota not rolled out several crisis containment measures since 2011.

"It's a huge improvement," Takaki Nakanishi, an auto analyst who runs his own research firm in Tokyo, said of the rebound.

"I think 3-11 helped everything," Nakanishi said of the March 11, 2011, catastrophe that killed more than 15,000 people, shattered the supply network and interrupted global production.

"They have a new supply chain management system built in."

Japanese automakers have strengthened offices and factories in Japan, adopted improved practices to track parts and implemented plans that will keep their businesses running in emergencies.

Toyota, for example, completed a survey of suppliers in 2013 to pinpoint weak links and now uses a database known as Rescue.

Rescue stores information about thousands of parts stored at 650,000 supplier sites, helping the automaker bypass bottlenecks when one supplier gets knocked out of commission.

Indeed, when the 6.5-magnitude quake struck on the night of April 14 near the city of Kumamoto on Japan's southwestern island of Kyushu, Toyota knew right away of trouble.

Aisin Seiki had two plants in Kumamoto that were knocked offline.

And just two hours into the first shift the following morning, Toyota suspended operations at its nearby Miyata vehicle assembly plant. When the 7.3-magnitude second quake hit early April 16, Toyota and Aisin, a Toyota Group supplier, were already working on Plan B.

Aisin's body-parts factory still had no electricity as of Wednesday, April 20. Its other disrupted plant, a die-casting factory, was being prepared at week's end to resume operations, perhaps as early as this week.

Aisin still is suffering from a shortage of parts, but it is producing enough to get some Toyota plants up and running, according to an Aisin spokesman.

The supplier has begun importing substitute parts from plants in China and Mexico, and it has almost completed a plan to shift production to other plants in Japan, the spokesman said.

It even asked a non-Toyota Group rival to make components for it, but the spokesman declined to name that other company.

Meanwhile, Aisin also is preparing to move its body-parts molds to other factories to let them take over component production.

Other damaged parts makers were rebounding, too.

Semiconductor maker Renesas Electronics Corp. said it planned to resume some operations at its damaged Kawashiri microcontroller plant on Friday, April 22. The factory makes the critical microchips that control everything from fuel injection to airbags.

Renesas was also a bottleneck after the 2011 earthquake. It brought down the global supply chain when that year's massive disaster took one of its plants offline for months. That plant was in northeastern Japan; the one hit by the latest quakes is in the southwest.

Renesas bounced back quickly this time partly because the damage was lighter. There was less jolting than in 2011, and Renesas has reinforced its factories since then.

The plant's fragile cleanroom was fortified in 2013 and managed to survive with its contaminant-free environment largely intact, a spokeswoman said. "We could see the sky from inside the cleanroom when it was hit last time," she recalled.

In response to the 2011 crisis, Renesas had an emergency task force in place to ramp up countermeasures immediately this time. It also has better integrated its factories since 2011 to make it easier to transfer production to an unscathed plant when another plant goes down. Because the stoppage was so brief this time, however, Renesas did not have to resort to that.

Indeed, this month's emergency is modest compared with 2011 and only a partial test of the industry's stepped-up preparedness.

The 2011 quake measured a nearly unprecedented 9.0 magnitude. The shaking was compounded by massive flooding and destruction from a tsunami. And that was topped off by the meltdown and radiation worries at Japan's Fukushima nuclear plant.

Thousands of people died back then, compared with dozens of people this time. And more than 600 auto suppliers were damaged in 2011, as opposed to a handful now. Japan's automakers had to make up for more than 1 million units of lost output in 2011, and it took months to restore plants to full production.

But April's rumblings also may be seen as a manageable trial run for future quakes that could hit Tokyo and Japan's industrial heartland someday.

Toyota and its counterparts will no doubt be fine-tuning lessons from the latest crisis before history repeats itself. c