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Japan nuclear plant shutdown adds new risk for auto industry.

The March 2011 Great Tohoku Earthquake and Tsunami struck the northeast coast of Japan.
These natural disasters were exacerbated by additional disruptions from the collateral damage to a
seaside nuclear reactor that generated electricity for residential and commercial use in that part of
Japan. Concern over leaking radiation caused the government of Japan to evacuate populations
from the vicinity of the damaged reactors and to close highways connecting manufacturing and
other employment centers. The damage to nuclear facilities also resulted in a shortage of
electricity in parts of the country.
These disasters have thrown into bold relief the vagaries and fragility of some elements of the
global auto supply chain. A typical motor vehicle has over 15,000 parts, and the lack of an
essential component may halt the completion of vehicles and cause a slowdown or stoppage of
assembly lines. Japan is the second-largest vehicle-producing nation (after China), and many of
the world’s vehicles and vehicle parts originate there.1
It is also where many automotive
technologies originate, giving Japanese suppliers “substantial and growing shares of the global
market.”
2 A relative handful of critical suppliers, especially of electronic components, were
unable to meet their commitments. In some instances, the automakers that depended on them had
few alternative sources of important inputs. Full restoration of supply capacity will take months.
Not long after the earthquake and tsunami, an industry analyst noted that “[g]iven the disruptions
in Japanese industrial activity, the impact on global supply chains could also be significant. This
is especially important in industries such as autos, telecommunications and consumer
electronics.”
In the meantime, it is likely that a number of U.S. auto production facilities will see a slowdown
of production throughout the spring and summer. Communities in the Midwest and South which
have been returning to normal after the recent recession may see a parts shortage-induced drop in
production that may affect employment and paychecks.
Overview of the Motor Vehicle Industry
The motor vehicle industry is a major part of the U.S. economy, accounting in 2010 for over
674,000 jobs, or 5.8% of all U.S. manufacturing employment.4 Although some American
manufacturers are adding production abroad, generating concern in Congress and in many states
about the future of auto manufacturing in the United States, several automakers are opening new
U.S. plants. In 2011, Toyota and Volkswagen (VW) have opened new plants in Mississippi and
Tennessee, respectively, and Nissan is building a new plant to open in Tennessee in 2012.

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