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The Impact of the Disaster in Japan on Korean Global Business--A Commentary
Few have not been shocked at the devastation from the earthquake and tsunami in Japan. Concerns over partial meltdowns and explosions at the crippled nuclear power plants only add to the situation.
Looking at the situation from a global perspective...
How will this disaster impact Japan and Korea-- strong competitive rivals in automotive and electronics sectors?
Media reports out of Japan (see below) note that auto production has been halted. The electronic industry also is seeing similar issues. That said, I feel we'll see a push by Korean global business groups to capitalize on the opportunity. Some Korean securities firms have noted with the disruption in Japanese brands' supply chain, production, and logistics Korean firms will move aggressively.
One also cannot discount some bitterness towards Japan by Koreans who suffered under Japanese colonial rule from the early 1900s to 1945.
I see 2 immediate concerns surfacing regarding the car industry.
1. Meeting the electrical needs of the Japanese auto plants. i.e. rolling black outs.
2. With global oil prices rising the Japanese auto plants will not be able to shift production to meet needs for more fuel efficient models and hybrids.
BTW I have no idea on how logistics is impacted... but it cannot be good.
Media Updates
The Mainichi Daily News website reported that Toyota officials had announced the continued suspension of work on Monday at its five domestic plants, including those operated by its subsidiaries and 12 auto parts plants. Toyota subsidiary Central Motor Co. makes Toyota vehicles at its plant in Miyagi Prefecture and Kanto Auto Works Ltd, also a Toyota unit, produces Toyota cars at its plant in Iwate Prefecture. Both prefectures were severely affected by the 8.9-magnitude quake.
A Toyota official said the suspension is partly to check whether workers at the factories are safe. Meanwhile, Nissan will also suspend production at its three domestic plants on Monday as two of them were damaged in the earthquake.
Others to follow suit included Honda, Toyo and Sumitomo while Mitsubishi and NEC said they will check lines at their plants to determine whether to resume production on Monday.
Source: Autoblog UK
New York Times notes:
Most Japanese auto assembly plants will remain closed on Monday, even though the factories are outside the hardest-hit regions and did not experience significant damage from the devastating earthquake and tsunami that struck on Friday. Automakers scrambled on Sunday to determine whether they would be able to build and export cars in light of the rolling power blackouts (meant to conserve electricity) and the damage to Japan’s infrastructure. “There is no way to get our products out, even if we make them, with the roads and distribution system damaged,” a spokeswoman for the Honda Motor Company, Natsuno Asanuma, told The Associated Press.
The three major automakers — Toyota, Nissan and Honda — have American plants that produce most of the models they sell in the United States. But many luxury cars, like the Lexus, or the smaller, fuel-efficient cars, like the Toyota Prius and Honda Fit, are built in Japan, and disruptions in exports could cost the companies sales at a time when rising gasoline prices have increased demand in the United States. For Toyota, the disaster comes as it is trying to recover after the recall of more than 14 million vehicles since 2009. Toyota built 3.3 million vehicles in Japan last year, about 43 percent of its global output, with more than half sent overseas.
A Toyota spokeswoman in New York, Mira Sleilati, said all of its plants in Japan would be closed Monday but that no information was available about supplies of the Prius or other Japanese-built models. Besides the nearly 141,000 Priuses exported and sold in the United States last year, Toyota sold more than 229,000 Lexuses, which were mostly built in Japan. Earl Stewart, the owner of Earl Stewart Toyota in North Palm Beach, Fla., said demand for the Prius had surged so much that he recently sold out. He worries that Toyota might not be able to get many more to his dealership any time soon.
“I put used Priuses on my showroom floor because we don’t have any new ones,” Mr. Stewart said. “The timing could not be worse. I don’t know how long it will take to get the roads and ports cleaned up and get Priuses back on the ships.”
Toyota had planned to start building the Prius in the United States starting in 2010 but canceled those plans during the recession; instead it is readying a plant in Mississippi to assemble the Corolla, a compact sedan.
Other affected models are the Toyota Yaris, a subcompact, and the Scion xB and xD, which are small hatchbacks sold at Toyota dealerships.
Two plants that build the Yaris and Scion models are among four operated by Toyota subsidiaries that were damaged and had to be shut down. The plant that builds the Yaris was opened less than a month ago in Miyagi, an area north of Tokyo that suffered substantial damage.
Nissan built 1.13 million vehicles in Japan last year and Honda made fewer than a million, slightly more than a quarter of the vehicles they sell worldwide. Honda said some plants would remain closed at least through Monday. Its dealers in the United States get more than 80 percent of their cars and trucks from North American plants. Several Honda hybrid models, including the Insight and CR-Z, and the Acura RLand TSX are made in Japan.
A Honda research and development center in Tochigi was damaged, causing the death of an employee, and it had to be closed.
Reuters reported that operations at the five assembly and parts plants for Subaru vehicles had also been halted.
Nissan said all of its plants in Japan would remain closed on Monday but that most appeared to have avoided major damage. Officials were evaluating the facilities and had not made a decision about when they would reopen.
Nissan dealers are not expected to experience any immediate effects, but there could be supply problems for Infiniti, Nissan’s luxury brand, which is built in Japan. The tsunami destroyed 1,300 Nissan vehicles at the Port of Hitachi awaiting export to American dealers as well as 1,000 vehicles at a service center in Miyagi, said a spokeswoman in the United States, Katherine Zachary. Cordy Cerami, the general manager at Infiniti of Montclair, a dealership outside Los Angeles, said: “We were assured that the plants were intact, but the suppliers were unsure. We should know something Monday or Tuesday.”
Despite the uncertainty for his dealership, Mr. Cerami said, “Our concern is for the people of Japan first and foremost. "
Source: NYT
Replies to This Discussion | 이 토론에 대한 답글들
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Permalink Reply by Brian on -
My amateur guess would be that countries that rely heavily on Japanese imports will suffer enormously from this. In particular supplies, sales, distributors, wholesalers, merchants. This can span auto parts, electronics, even seafood. The scarcity of this and the fact that this entire ecosystem is coming to a screeching halt may cause some to go out of business, raise prices, and raise interest rate. Most markets feel that while this will have a significant impact on Japan's economy the global affect will be minimized...who knows. It's interesting to note that some have pointed out this may be a buy opportunity as investors dump shares. Also Japan's been battling recession and reconstruction efforts could help give a much needed boost to the economy. The problems with the nuclear reactors should increase coal and other fuel consumption.
Merrill Lynch has released a statement that states:
The earliest financial reports out of Japan on Friday, after the earthquake, had Japanese GDP being downgraded 0.1-0.2%. That will likely take 2011 Japan GDP growth down to 1.3% for the year. If that holds, it does not sound sufficient to provoke a far-reaching Japan policy reaction.
If the earthquake does end up having a meaningful impact on global investments, it likely will be because bonds and equities could be hurt by a major withdrawal of capital by Japan. We’ll know that this is happening if the yen reaches new highs.
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Permalink Reply by Lara Tosh on
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I agree Mike ...there will be fall-out (not just of the nuclear variety) for years to come. I'm hoping that some of the results of the "triple disaster" are positive (i.e.: changes in how the human race as whole lives & works together, changes in our systems, etc.).
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Permalink Reply by Don Southerton on -
Yes I was in meeting today with US car executive. Dealers were told supply would be impacted for month.
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Permalink Reply by Steven S. Bammel on -
I don't think this event has to be a long-term negative for Japan though. What better way could there be to get knocked out of twenty-years of complacency and stagnation and come together as a nation to rebuild? Don't you think Japan is ripe for a leader to bring the nation through this and that if such a leader arises, the Japan of 5-10 years from now could be a place far more lean, mean and successful than it seems now? The Korean papers (well, at least the 중앙일보) is full of articles about the need for strong leadership in Japan.
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That's a great point, Steven: this definitely has high "turning-point" potential.
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Permalink Reply by YOGESH AGGARWAL on -
CORRECTLY SAID,
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WOW!!!
Chilling insights / information.
...this definitely changes things.
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Permalink Reply by Steven S. Bammel on
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Yeah, the Korean newspapers are completely up-in-arms about the situation now. Today's Jungnang Ilbo leads with an article about how in 1986, Japan protested that the Soviet Union wasn't releasing proper information about radiation even though Japan was 8000km away from the accident site; now, Japan isn't releasing proper information to Korea, which is only 1000km away.
One wonders how much international goodwill toward Japan will remain after this situation is ultimately dealt with. It reminds me of how fast many parts of the world lost their sympathy for the US after 9/11.
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Agreed! TEPCO & the Japanese Government aren't looking so "good" right about now.
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Permalink Reply by Wally Nes on -
Looking at the currents around Japan's coasts it seems that most of the infected water will be flushed out east minimizing any impact on quality of non migratory fish in the Sea of Japan.
I am not sufficiently acquainted with the Korean fishing industry to judge what percentage this is, nor where the migratory fish come from.
The mere proximity of Korea to Japan, despite ocean currents, may have a negative impact on Korean seafood export though.
In a BBC news article it is stated they're emptying low-level radioactive seawater into the sea so the more highly contaminated water can be stored in waste buildings.
http://www.bbc.co.uk/news/world-asia-pacific-12992284I wonder what alternatives there were.
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Permalink Reply by Steven S. Bammel on
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Indeed, there is the question of whether other better options exist. But beyond that, the issue is whether information is being released in adequate quantities in a timely fashion, and whether the information is a pack of lies anyway. KEPCO's got a track-record of being untrustworthy in its information sharing practices during times when the consequences of being honest would have been far less unpleasant than they are now.
And as for where the water goes... It's one thing to say it goes out into the Pacific and gets diluted, but if the high levels of radiation infect nearby organisms which are way down the food chain, those then get eaten by fish that get eaten by fish that get eaten by fish that get eaten by fish that travel into every nook and cranny of the ocean worldwide.
There are a lot of unanswered questions about what's going on and where things are heading.
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Well said guys ...and if only egos (corporate & personal) weren't at stake here -that's what so much of this is about: people / corporations / governments trying to maintain their "masks" as long as possible.
I'm both curious about & dreading what lies ahead.
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