Factories Close as Power Is Cut in Wake of Japan's Earthquake

Factories Close as Power Is Cut in Wake of Japan's Earthquake

 

By HIROYUKI KACHI And YOSHIO TAKAHASHI

Associated Press

Parents on Saturday view the body of their daughter, which they found in a driving school's courtesy vehicle that was smashed by the tsunami at Yamamoto, northeastern Japan.

Hobbled by Friday's earthquake, Japan's manufacturing sector faced a new challenge from power shortages, which forced closings even at plants that escaped damage last week.

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And as Japanese factories that make cars and chips halted operations, that threatened to interrupt some supplies across the globe, at least temporarily.

Japan's auto makers all but shut down production, closing plants that supply not only cars for domestic sale, but also engines and other parts needed by assembly plants around the world. For some models, such as Toyota Motor Corp.'s Prius hybrid, Japan is the only source.

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Japanese authorities said coordinated power outages would begin Monday and last at least several weeks to deal with supply shortages. Prime Minister Naoto Kan said there was a risk of large-scale electrical outages, in large part because the country's nuclear reactor fleet, which supplies 20% of the country's electricity, was crippled.

Plants producing steel, paper and consumer electronics also were closed. And companies coped with disruptions to communication and transportation networks, as well as the need for their employees to learn the fates of missing family members.

Suzuki Motor Corp., Mitsubishi Motors Corp. and Hino Motors Ltd. said Sunday they would halt production at their domestic plants the following day. Toyota, Honda Motor Co. and Nissan Motor Co. announced similar plans Saturday. Dozens of auto-parts plants also were affected.

Toyota said it would suspend operation at all 12 of its Japanese plants Monday to give employees and parts suppliers time to check on the safety of their families. Toyota said it would determine Monday when to resume operations.

Mazda Motor Corp. suspended production at its four plants in western Japan Monday night and all day Tuesday because of parts shortages.

The interruption in parts production threatened to slow output at Japanese-owned auto factories in other parts of the world.

The quake could also tighten supply of the Toyota Prius hybrid, at least in the short term. A plant that makes parts for the Prius was damaged, dealers briefed by Toyota said. A plant that makes small cars that Toyota exports to the U.S. under the Scion name also was damaged, the dealers said.

Over time, however, many of the auto makers and their suppliers should be able to shift production to plants in the U.S., Europe and other regions. An industry analyst said the quake's impact would be "manageable."

Semiconductor foundries in northern Japan, which was most affected by the earthquake, appeared to suffer limited damage. But many remained closed because of power outages or other problems. Affected companies included Renesas Electronics Corp., Texas Instruments Inc., Freescale Semiconductor Inc. and ON Semiconductor Corp.

Analysts said the biggest impact could be on customers of Renesas. The Tokyo-based company is among the world's largest maker of microcontrollers, which manage operations in cars and many kinds of office and industrial equipment.

A Renesas spokeswoman said the company, which has facilities in northern Japan, was assessing damage but was focused on the safety of its employees. Texas Instruments said chip factories in Miho and Aizu were closed.

In many cases, microcontrollers from one company can be substituted for another, said Len Jelinek, an analyst with IHS iSuppli. But he said auto makers tend to have one or two suppliers for key chips, which aren't readily replaced, and stock little inventory of those components. The closure of some Japanese auto factories could mitigate any shortages of microcontrollers, however, Mr. Jelinek said.

There seemed little likelihood of disruption in supplies of data-storage components known as flash memory—chips that are needed for such products as Apple Inc.'s iPads and iPhones. Toshiba Corp.'s and SanDisk Corp.'s Japanese factories for those components—which account for about a third of global production—are hundreds of miles from where the earthquake struck.

Questions remained about production of displays and their components, however. Factories in Japan primarily make large LCD displays used in television sets, said Sweta Dash, of IHS iSuppli, though she said inventories appear to be sufficient to absorb short interruptions.

Banks and insurers, meanwhile, said they planned to open for business Monday, indicating that the country's financial system is functioning, though J.P. Morgan Chase & Co. was letting employees work from home.

Some transportation disruptions eased. Major airlines resumed flights. So, too, did cargo carriers United Parcel Service Inc. and FedEx Corp., though service to parts of eastern Japan remained spotty. "We will have ground service delays in eastern Japan because of road conditions," said Chris Stanley, a FedEx spokesman.

Companies including auto-parts supplier Robert Bosch GmbH and Volkswagen AG said they were organizing flights for foreign employees who wanted to leave.

The situation at a Radisson hotel near Narita airport illustrated how disruptions in Japan moved to a new phase. The building is structurally sound and full of guests, many of whom were stuck in the country due to flight delays, but was having trouble keeping enough food in stock because of road closures and the diversion of goods to hard-hit areas like Sendai, spokeswoman Molly Biwer said. She predicted supply challenges would mount. The hotel's backup generators would ease the effects of power cuts, but fuel for shuttle buses was running short.