Toyota, the main chip supplier to cut production due to Japan earthquake

The window of a car dealership is shattered after a strong earthquake in Koriyama, Fukushima Prefecture, Japan, in this photo taken by Kyodo on March 17, 2022.

Kyodo | via Reuters

DETROIT — A major earthquake this week in Japan has caused additional problems for an already constrained global auto supply chain, which continues to grapple with problems stemming from the coronavirus pandemic and Russia’s ongoing invasion of Ukraine.

As companies monitor and assess the potential residual effects of Wednesday’s 7.4 earthquake on their supply chains, the auto companies most immediately affected include Toyota Motor and Renesas Electronics, a major supplier of semiconductor chips to the auto industry.

Research firm LMC Automotive expects the earthquake to reduce vehicle production this year by 25,000 to 35,000 cars and trucks, adding to expectations already dented by the ongoing shortage of semiconductor chips and the war in Ukraine.

“This is just another layer on top of an already fragile system where we are seeing a lot of pressure on the manufacturing side of the business,” said Jeff Schuster, LMC President of the Americas. “It’s definitely something the industry didn’t need at this point.”

Toyota said Friday that it will suspend operations at more than half of its plants across Japan. The world’s largest automaker by volume said 18 production lines in 11 plants (out of 28 in 14 plants) will be shut down for three days next week due to supply problems caused by the earthquake.

“Due to parts shortages caused by earthquake-affected suppliers, additional adjustments to production processes will be made at some plants in Japan as follows,” Toyota said in a statement.

The shutdowns were announced a day after Toyota cut its production by 150,000 units from April to June due to growing uncertainty over the supply chain.

For more than a year now, the global auto industry has been dealing with a global shortage of semiconductor chips due to factory closures at the start of the coronavirus pandemic. Chips are the most prominent issue amid global supply chain problems caused by the pandemic, rising costs, inflation and Russia’s invasion of Ukraine.

“The most important thing about this is yet another impact on an already constrained system,” Stephanie Brinley, principal automotive analyst at S&P Global Mobility, previously told IHS Markit. “It looks like it’s going to be a short-term effect…but it just doesn’t need to be dealt with at the moment.”

Renesas, which is said to make nearly a third of microcontroller chips used in cars globally, operates three factories near the epicenter in northeastern Japan, according to the company.

The Tokyo-based semiconductor supplier said it is trying to restart factories and return them to pre-earthquake production volumes by Wednesday, including one early Sunday.

Renesas’ importance to the global automotive semiconductor supply chain was highlighted last year after a factory fire caused automakers such as Ford Motor to drastically cut production at facilities, including several in North America.

A company spokesperson said Friday that Ford teams “have been closely monitoring the situation and are actively working to determine the impact, if any, of this has on our operations.” General Motors issued a similar statement.

Japanese small car maker Subaru said on Friday that it would suspend production on Friday and Monday at its two car, engine and transmission assembly plants due to the earthquake.

“Subaru Corporation will temporarily suspend production at its vehicle manufacturing facilities due to interruptions in the supply of certain parts, as the operations of factories supplying those parts have been affected by the earthquake,” Subaru said in a statement.

Spokesmen for Japanese carmakers Honda Motor and Nissan Motor said their operations had had little impact due to the earthquake. A Honda spokesperson said the company suspended the night shift at a Japanese factory when the earthquake struck.

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