Toyota Motor Corp is working to create a robust supply chain that would recover within two weeks in the event of another massive earthquake like the one on March 11 that is still affecting output six months later, a top executive said.
Toyota and other Japanese automakers were forced to halt a large portion of their production both inside and outside Japan for months after the earthquake and tsunami cut off the supply of hundreds of parts from the country’s devastated northeast.
“We’re making checks now to see what needs to be done to enable a recovery within two weeks when the next one -- expected in the central Tokai region -- comes,” Executive Vice President Shinichi Sasaki told Reuters in an interview on Tuesday.
“We’re about 80 per cent done with these checks,” he said.
Mr. Sasaki, who is in charge of purchasing, said Toyota was taking three steps to create a buffer against supply chain risks, adding that he expected all the steps to be completed in roughly five years.
The first is to further standardize parts across Japanese auto makers to use more common components so that when one factory is hit, the same parts could be manufactured elsewhere, he said.
The second step is to ask suppliers further down the chain to hold enough inventory -- perhaps a few months’ worth -- for specialized components that cannot be built in more than one location, or take anti-quake measures that guarantee safety against any tremor, he said.
This was to prevent a repeat of what happened this time with the maker of microchip controller units (MCUs), Renesas Electronics Corp , whose production is still seen a few weeks away from being fully restored.
Part of the second step would also involve developing technology that would provide more options for materials used in components, such as substituting rare earths controlled mostly in China.
The third step to becoming more resilient was to make each region independent in its parts procurement so that a disaster in Japan does not affect production overseas, Mr. Sasaki said.
These measures would also be effective in improving the buffer against the strong yen, Sasaki said, by eventually lowering costs and creating a natural hedge within each region.
More than the March 11 disasters, Toyota is hurting from the yen’s historic strength against the dollar, which is wiping billions of dollars in profit from the export-dependent company.