Rotating Power Rationing Plan Of Japanese Automakers Could Mean A Loss Of 1.3 Million Units
After the Mach 11 earthquake and tsunami shut down a large number of power plants in Japan, rolling blackouts were instated in large parts of the country. Lack of power emerges more and more as the biggest impediment to a quick recovery.of the Japanese automotive industry. Most of the industry has been shut down. Power will remain scarce for many months in Japan. Come summer and A/C time, the situation will be worse. Japanese automakers are now considering running their factories in rotation to help cut the industry’s electricity consumption, The Nikkei [sub] writes today. Japan’s automakers could prepare for a production loss of well over a million units for the year.
The blackouts, which usually last three hours per day, take a big hit on plant efficiency. Metal-casting, for instance, is heavily affected. Smelting ovens need to be cleared and emptied before the shutdown and need a lot of time to come back up once power is restored. A three hour blackout often results in a nine hour downtime.
Rather than having power outages every day, the manufacturers want to secure stable electricity supplies for their factories in exchange for cutting the overall power consumption by rotating production. Under the plan, whole factories would be shut down on certain days of the week. Automakers will meet at the office of the Japan Automobile Manufacturers Association (JAMA) to come up with a rotation schedule.
Now run the numbers. If a car company works only 5 days instead of 6 a week, that translates into a reduction of output of 17 percent. If the plan will remain in effect for the whole year, Japan could lose 1.3 million cars by the end of the year. Extra shifts would be out of the question, because that would negate the whole idea of power savings.
The 1.3 million number may sound sensationalist, but it is conservative. “Lost production in the two weeks since an earthquake and tsunami struck northeast Japan tops a third of a million vehicles,” writes Reuters, “and it could be months, rather than weeks, before the country’s automakers get back on track.” If more than 330,000 vehicles remained unmade in just two weeks, it does not take huge math skills to estimate the damage caused by the loss of power alone.
According to an energy brief by The Institute of Energy Economics, Japan, “a power shortage is definitely anticipated for the summer cooling demand season as well as next winter.” The Tohoku and Tokyo power companies have lost approximately 15 percent of their capacity for “a longer duration.”
Likewise, approximately 14 percent of the Japanese refining capacity is lost and needs “to be repaired over a longer time,” says the energy brief. Large parts of petrochemical production are reported destroyed by earthquake and fire. “Recovery is considered to take time,” says the report.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
More by Bertel Schmitt
Comments
Join the conversation
I wonder if the long-term effect will be a stablization of prices, reduction of incentives, and decrease in the overcapacity of car production if manufacturers worldwide will be affected? If so, that may be a "good" thing. Ironically though, Japan has to replace thousands of cars destroyed too, so demand will probably remain high.
If Japan's electricity shortage continues long term then they will likely adopt a prioritized allocation scheme instead of simple minded geographic rolling blackouts. The damage to Japan's economy from shutting down export oriented factories is more serious that would be shutting off power to other users. Some kinds of facilities like retails stores and residences can deal more easily with on again off again power than can others. Probably the worse factory to suffer from any power outages is a semiconductor manufacturing plant. A great deal of high value in-process product can be completely destroyed by a power outage.
Japan may need to go into a difficult crisis prioritization mode such as Japan and Europe lived through in the post WWII period.