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Results of Japan quake could cost US more than 5 million cars

Mar 31, 2011 Brian Bradley

Japanese auto makers are facing an industry-wide crunch as the after-effects of the March 11 earthquake and tsunami have brought assembly lines throughout the country to a standstill. That pause could have serious ramifications on the American auto industry, according to analysts. A study from IHS Automotive revealed that the U.S. market could face a shortfall of 5 million vehicles in the wake of supply chain cuts and other material that will take longer to ship out of Japan. Already, car makers have lost up to 320,000 vehicles by IHS' estimate, but with delays expected to continue at both Japanese and American factories, that number could spike. The news comes at a critical time for U.S. automakers, which finally began to see positive growth in 2011 after battling through bankruptcies and government takeovers the last few years. The Detroit Free Press reports that many American factories have recently halted assembly lines due to lack of supply. The paper reports that Toyota and GM have faced lulls in assembly, including factories in Louisiana and New York. The problem could become even worse if blackouts in Japan continue for an extended period of time. "We could potentially lose up to 5 million units and while much of it could be made up over time, it could not be made up in 2011," said Michael Robinet, director of global production for IHS. "As we stand today, 18 percent of global auto output is down." The natural disaster and resulting disruptions in supply lines have taken their toll on the value of car makers. USA Today reports that since March 11, Nissan, Toyota and Honda have all seen their share prices plummet by 13.3 percent, 7.2 percent and 6.7 percent, respectively. GM shares hovered at $31.39, while Ford has somehow remained immune and experienced a 7 percent gain in share price. "Our best case expectation is for sporadic industry production outages in North America," Brian A. Johnson, an analyst with Barclays Capital, told the Rochester Post-Bulletin. "In particular, Toyota single-sources many components that are used on multiple models, while the Detroit Three use a more fragmented parts and supplier base." According to the Free Press, auto makers had expected global vehicle production to reach 74 million in 2011. However, that number has already taken a hit and could drop further should Japanese plants and suppliers encounter additional disruptions.