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GM to idle La. pickup assembly plant for quake-related parts shortage

From staff, wire reports
Automotive News | March 17, 2011 – 2:21 pm EST
UPDATED: 3/17/11 5:03 pm ET

DETROIT — General Motors will suspend production at its Shreveport, La., assembly plant starting Monday because of a parts shortage stemming from the earthquake in Japan.

The move appears to mark the first North American assembly plant to be idled because of the Japanese disaster.

The plant makes the Chevrolet Colorado and GMC Canyon compact pickups.

GM manufacturing spokesman Chris Lee declined to identify the missing Japanese part or parts, or estimate how many vehicles would be knocked out of the factory schedule because of the interruption.

The Shreveport line will go down for at least one week, Lee said, and remain down until the part shortage is resolved. The plant employs 923 people.

“We will resume production at Shreveport as soon as possible, and at this point, we have sufficient vehicles to meet customer demand,” GM said in a statement. “At all other plants in North America, we continue to run normal operations.”

The industrial damage in Japan caused by earthquakes and a tsunami has knocked an unknown number of auto parts companies and material suppliers out of commission. Complicating the crisis are power outages, port disruptions and widespread human suffering in some areas of Japan.

No other U.S. assembly plant has been forced to suspend auto production as of GM’s decision this afternoon. Several auto plants in Japan have gone down during the past week of crisis there. But officials at Japanese-owned plants in North America have said that their own pipelines of components remain adequate to continue production for now.

The North American auto industry — both domestic and Japanese — has worked for more than two decades to localize its supply line of critical parts. But the absence of a single component, such as a stamped part or an engine control device, can still stop an assembly line.

GM’s statement said the Detroit automaker is monitoring events in Japan.

“Like all global automakers, we will continue to follow the events in Japan closely to determine the business impact, working across the organization to maximize flexibility, supply the most critical operations, and effectively manage cost,” GM said.

GM is suspending production earlier than expected, said Tracy Handler, a production analyst at researcher IHS Automotive.

“We didn’t expect for this ripple to hit quite this fast for North American plants,” said Handler.

GM may be suspending Shreveport production earlier than it needs to in order to redirect parts supply to better-selling vehicles, IHS’s Handler said in a telephone interview.

GM sold 4,810 Colorados in January and February, a 51 percent gain over the same two months of 2010. As of March 1, GM had a 58-day inventory of the pickup trucks, according to the Automotive News data center.

As for the Canyon, GM sold 1,459 of them during the first two months, a 21 percent gain from last year. It has a 60-day supply of Canyons in inventory.

Wait and see

Speculation about the potential impact of the earthquake on parts production and disruptions in assembly operations has been running rampant around the world this week. Most of the speculation has focussed on potential shortages of microchips and electric batteries, two key product lines with a significant presence in Japan.

“It only takes one supplier to stop a car plant,” Nissan Senior Vice President Andy Palmer said today during a phone interview from his office in Tokyo as aftershocks rattled the building.

However, Palmer added: “I think the impact on our overseas (non-Japanese) facilities is going to be pretty minimal.”

Nissan’s facilities outside Japan — including plants in the United States, Europe, Thailand and China — usually purchase about 95 percent of parts locally, while some of the remainder does come from Japan.

“I know that we have got about six weeks of cars in supply for our European facilities for example,” Palmer said, adding that supplies of parts had left Japan by boat before the earthquake hit.

Some Nissan suppliers have had facilities damaged by the tsunami that struck the country after the earthquake, while others are inside the exclusion zone around the stricken Fukushima nuclear plant, Palmer said.

“To the best of my knowledge none of the suppliers we are in distress with are amongst the ones that we cannot counter-source,” Palmer said.

Other automakers have been monitoring the situation closely.

Chrysler’s pipeline

Chrysler Group LLC, which hasn’t had its production disrupted by last week’s earthquake in Japan, said it could take four to six weeks for the disaster to start affecting the U.S. auto industry’s supply chain. Chrysler gets 2 percent to 5 percent of its components from Japan, Katie Hepler, a spokeswoman, said in an e-mail.

The component “pipeline is full, but of course it’s not being fed at the other end,” said Dan Knott, Chrysler’s senior vice president for purchasing. “For the U.S. side, in particular, we won’t see the full brunt for four to six weeks.”

The company is getting a daily report from the region and there is a risk that production could be lost because of parts not coming from Japan, Knott said today in an interview at Chrysler’s headquarters.

“We have nothing on our radar screen right now that indicates we will be significantly impacted,” he said. “That’s not to say I’m not nervous.”

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