IHS Expects Auto Industry To Crater After Japanese Earthquake

Parts shortages triggered by the earthquake and tsunami in Japan could reduce global automobile production by up to 30 percent, research firm IHS Automotive told Bloomberg. Or at least that’s what Bloomberg heard.

Michael Robinet, vice president of IHS says that if parts plants affected by the quake don’t return to operation within six weeks (they might not), global auto output may drop as much as 100,000 vehicles a day. The industry produces 280,000 to 300,000 vehicles daily, he said. That number is correct, assuming the standard 260 work days a year.

“Most vehicle manufacturers will be affected by this,” Robinet told Bloomberg. “It will be very difficult for any major automaker to escape this disaster.” That is also correct.

About 13 percent of global auto industry production is down right now and production of about 320,000 vehicles has been lost, mostly in Japan, Robinet said according to Bloomberg. True.

According to Robinet, auto executives are cautious about forecasting lost production. They seek other sources for parts. “If solutions aren’t found soon, most major automakers will experience disruptions by mid-April because supply networks are intertwined.” Very true.

According to HIS, the third week of April could be the start of severe production slowdowns. TTAC had projected the April/May timeframe early on. Morgan Stanley agrees.

By then, the industry may have lost 1.2 million to 1.8 million vehicles, and will lose almost 3 million units within eight weeks. IHS estimates about half of the losses coming from assembly plants outside of Japan. Absolutely possible.

“We could lose up to 5 million vehicles in a worst-case scenario,” Robinet said. “This will affect income for the entire year if this continues for an extended period of time.” Also true.

What is not right is Bloomberg’s math. By using the 5 million worst case number, IHS figures that in the course of the year, either the Japanese suppliers will get back on their feet, or the worldwide producers will have found other sources. The world produced 77.6 million vehicles last year. A loss of 5 million would be a serious loss of 6.4 percent. But not a loss of 30 percent.

6.4 percent would be bad enough.