Honda struggle in tsunami’s wake

Posted on 6 Apr 2011 by The Manufacturer

Japanese automotive manufacturer Honda has halved production at its Swindon-based factory due to shortage of parts sourced in its home nation.

Like many automotive manufacturers Honda is only just beginning to experience the full scale of the repercussions of the series of disaster that have recently befallen Japan.

It has taken some weeks for supply chain implications to surface but now, with distribution of components from Japan having only just been resumed, Honda has been forced to halve the planned production schedule at its factory in Swindon due to a lag in arriving parts.

Some 3,000 workers are employed at the Swindon-based factory and despite the uncertainty in its supply chain Honda has stated that these employees will remain on full pay while hours are ‘banked’ for when production is scaled up again later in the year.

Honda was optimistic that future up-scaling would allow it to claw back production targets however it is anticipated that today’s move will create a 22,500 deficit against annual output goals. Lean principles will enable the company to tackle this challenge as the factory, which has the capacity to turn out 250,000 cars per year is adept at balancing utilisation with demands and variation.

The dearth of parts, which Honda says effects just a few components, the rest being source in Europe, should ease soon as production in Japan is scheduled tore-start on April 11.

Other carmakers, particularly Toyota and Nissan, are understood to be facing similar challenges to Honda, a fact which should prevent dramatic shifts in competitive positioning however, the added complication of volatile share prices across the automotive industry means that markets remain unpredictable. The sell-off of shares in Toyota and Nissan has been particularly severe, shaving 8% and 10% off their market values.

In response to this market volatility and the short term production-choke automotive dealers have already seen prices rise globally but the general feeling across the major automotive manufacturers is that this will be a short lived crisis and that the longer term outlook will see the industry return to predicted trends.