Now made in Mexico: Japan auto suppliers shift China production after coronavirus
16/03/2020 13:32
By Naomi Tajitsu and Maki Shiraki
TOKYO, March 16 (Reuters) - In the Chinese coastal province
of Jiangsu, where supply chains have been shattered by the
coronavirus outbreak, one auto supplier has already shifted
production of parts for Mazda Motor Corp 13,000 kilometres away
to central Mexico's Guanajuato State.
The bid to keep production lines moving comes at a high cost
for Japan's auto industry, already squeezed by an expected
downturn in consumer demand in markets such as the United
States, China and Japan as the coronavirus crisis deepens.
To deal with a Chinese production shortage of a component
used in the exterior trim of the Mazda3 and CX-30 models, the
auto supplier cranked up output of the part at its Mexico plant
by 50%, airlifting the products to Mazda's 7278.T assembly
line in Japan, a person at the supplier with direct knowledge of
the matter told Reuters.
In total, the move has cost Mazda more than $5 million, the
person said, citing extra shifts and air freight charges.
"Substitute production costs an arm and a leg," said the
person, who spoke on condition of anonymity and asked Reuters
not to identify the supplier or the part.
"But Mazda doesn't want to stop production and have asked us
to keep our supply coming. They are taking on the expense."
A Mazda spokeswoman said the company was "assessing various
countermeasures for swift recovery while minimising the impact
on production at the same time".
Although Mexico provided a solution for the Mazda supplier,
the country is itself bracing for a supply crunch, with local
officials warning that disruptions to parts shipments from China
could deal a blow to its own auto manufacturing industry.
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Many Japanese suppliers also manufacture in the United
States, Europe and Asia.
As one of Japan's smaller automakers, Mazda trails rivals
Toyota Motor Corp 7203.T and Nissan Motor Co 7201.T in sales
and production capacity. To keep costs down, it has for years
focused on sharing as many parts as possible across its line-up.
Relatively low volumes and the standardised design and
production model also give Mazda and its suppliers more
flexibility when considering options for shifting production,
one Mazda insider said.
Larger automakers, which require a higher volumes of parts
and typically use a wider variety of components across their
models, may, however, find themselves with fewer options.
(For an interactive link to major Japanese automakers' sales
and production in China, click on https://tmsnrt.rs/2TEpfLe)
SHIFTING AWAY FROM EPICENTRE
The Chinese vehicle sales of Japan's top three automakers
plunged by as much as 85% last month as demand in the world's
top car market took a pummelling from the virus outbreak,
prompting China's automaking association to call on the
government for tax cuts and other measures to support sales.
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Meanwhile, output of LED headlights and tailights at Koito
Manufacturing's 7278.T plant in China's Hubei Province, the
epicentre of the coronavirus outbreak, ground to a halt in
February after the Chinese government ordered offices, schools
and factories to close.
While partial operations resumed last week, the company, the
world's biggest maker of automotive lighting and a supplier to
Toyota, Nissan and others, is preparing to move some production
elsewhere to fulfil export orders, a Koito spokeswoman said,
adding it was discussing arrangements with clients.
"There are lamps that we make for vehicle models made in
North America, Japan and China, which are fairly similar between
those regions," she said, declining to give further details
about its plans to shift production.
Time and cost concerns mean other suppliers will be less
keen to follow the example of Koito and the Mazda supplier,
despite expectations that it will take months for manufacturing
output in China to return to normal.
Kasai Kogyo 7256.T , which supplies Honda with interior
door trim and roof parts, said it was looking at the possibility
of shifting production from its Wuhan plant to one of the many
plants it operates in North America, Europe, and Asia, but added
that doing so would drive up costs and take months to organise.
The parts it produces are among the largest components used
in cars, and are cast from dies, which can be model- and
country-specific and difficult to transport because they can
weigh hundreds of kilogrammes.
"Dies take months to produce, up to a year for bigger ones,"
personnel manager Yohei Shinoda told Reuters.
"So the process to shift production of a part from one plant
to another isn't as easy as it may seem."
(Reporting by Naomi Tajitsu and Maki Shiraki; Editing by David
Dolan, Kirsten Donovan)
((naomi.tajitsu@thomsonreuters.com; +81364411078; Reuters
Messaging: naomi.tajitsu.thomsonreuters.com@reuters.net))