Will this be a missed opportunity for American car companies?

The news coming from Toyota is very grim. Toyota gave word to many of its plants that they should all prepare for potential temporary shut downs. The main reason due to crippled factories in Japan unable to supply vital parts for manufacturing. Honda is faring no better.

At a time when gas prices are starting to skyrocket and Prius sales had a record February, it could end up being a perfect storm for American car manufacturers. While many companies do outsource and get parts from Japan, there is still opportunity for them to take advantage of the situation. However, the real question is: Will they?

Cars such as the highly advertised Ford Fiesta diesel would be an example of a benefactor if Japanese car companies are forced to halt manufacturing.  Chevrolet sold about 48,000 vehicles with four-cylinder engines in February, which were higher numbers than this past January and also February of the previous year.

However, will a potential lack of supply of fuel efficient cars from Toyota and Honda be enough to drive consumers to other companies? Will American car companies be able to navigate a constrained supply chain? Only time and long term gas prices will tell.

Let’s look at how investors are speculating:

There looks to be some small gains, but nothing to write home about yet. While some speculate Ford will be able to withstand supply shortages of parts, others are expecting Ford to announce partial shutdowns soon.

What about General Motors?

They had small gains as well, but they have other issues because they do outsource many parts from Japan. In fact, GM shut down production at its Shreveport plant in Louisiana for the week of March 21 because they ran out of parts that were made in Japan. However, it is a truck manufacturing facility, so with current trends of car buyers moving towards smaller and more efficient cars, this may not be as bad a hit as some would expect.

If they cannot capitalize on these events maybe this could also be used as an opportunity to teach American car companies to rely less on foreign parts and improve our own capabilities within the US.

2 Responses to “Will this be a missed opportunity for American car companies?”
  1. Another good article Gian, though I have to wonder if there would be some short term gains in looking at the part manufactures which supply the components to auto makers. From what I have seen, globally, auto manufactures seem to have quite a bit of dependence on Japanese part suppliers (i.e. Hitatchi) which may have been damaged by the tsunami. Now many of these manufacturers will need to find a short term or replacement suppliers for critical parts, room for to make some profit for investors by investing in these suppliers?

    brief article on the tsunamis effect on auto manufactures

    • Gian Sorreta says:

      It can be hard to tell. A lot of suppliers make contracts in terms of supply time length, etc, so some car manufacturers may be locked for a while. The alternatives suppliers could also have less quality, which may damage reputation in the long run. This really looks like something that would need insider information in order to invest…

Leave A Comment