Toyota: Microchip, Rubber Product, Paint Additive Shortages Most Critical

Toyota’s global manufacturing chief says microchips, rubber-related products and paints additives are the top three items most lacking from the auto maker’s supply chain.

Up to this point, Toyota has identified 150 parts in short supply due to fallout from the March 11 Japanese earthquake and tsunami.

“We are putting the situation of recovery and supply conditions for each part item under scrutiny at the moment,” Atsushi Niimi, executive vice president-production control, production engineering and manufacturing, tells analysts and media during a conference call.

Niimi refuses to speculate on why Toyota seems to be more affected by the situation in Japan than other Japan-based OEMs.

Toyota President Akio Toyoda announced late last week the auto maker wouldn’t see normal production levels until November or December, after visiting critical suppliers one-by-one.

While Honda also says it doesn’t expect to reach normal production levels in Japan until late in the year, Nissan has indicated it will hit 80%-90% capacity utilization there by the end of May.

Currently, Toyota’s Japan vehicle production is running at half capacity, while overseas plants are utilizing just 40% of their production capability.

By July, Toyota expects to have sufficient parts supply in Japan to return to normal production speed, with ramp-up at overseas plants beginning in August due to shipment time from Japan.

Niimi rejects the notion single-sourcing at the Tier 1 level is to blame, saying Toyota has multiple Tier 1 suppliers for many of the parts in short supply. However, many of the Tier 1 suppliers source from single Tier 3 or Tier 4 suppliers, many of which are not fully functional.

“They are renowned for their high-engineering capability, and I don’t think it will be easy for us to (find) other sources,” he says.

Niimi can’t say generally how many days’ inventory of parts Toyota holds, although he says this information is known on a part-by-part basis.

“Toyota uses a lean production system, and it doesn’t seem we have many days’ (supply) of parts in inventory,” he says, adding, at the moment Toyota has 2.5 months’ stock of finished vehicles.

While shortages of Japanese parts and components are reverberating worldwide, analysts say Japanese auto makers are uniquely exposed, leaving an opening for U.S. and Korean manufacturers to grab market share.

“I think Nissan and Honda are more or less in the same situation in terms of exposure to the disaster,” Yale Zhang, managing director of industry consultancy Automotive Foresight (Shanghai) Co. tells Reuters.

“As such, (General Motors), Ford , and Hyundai would be the biggest beneficiaries in North America on the premises they can find easy replacement for parts previously supplied by the Japanese,” Zhang says.

GM North America President Mark Reuss says his company won’t try to take advantage of the situation.

“We would do nothing on a predatory basis,” he says. “We’ll keep our production systems level and constant during this period of time. The market will be the market, but any sort of initiative to take advantage of that would not be the way General Motors approaches the situation at all.

“We strive to be a company of integrity, non-predatory. We will compete hard, but we will not compete on other folks’ disadvantages.”

Hyundai, the auto maker considered to be Toyota’s main challenger in the U.S. in terms of passenger cars, says the only shortage it is experiencing is that of the sparkly paint additive, xirallic.

“We’re looking for alternatives to provide the same look and feel,” Hyundai Motor America CEO John Krafcik told Ward’s at last week’s New York auto show.

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