Automotive Industry Survey: Tremor Supply Chain

A sudden quake caused an immediate destruction of the chain linking Wenchuan and surrounding areas with the outside world.
Also connected to this chain are car OEMs and suppliers. Although there may be hundreds of suppliers linking with a mainframe factory across the country, if any one of these suppliers has problems with logistics, it will be enough to make a host factory thousands of miles away.
For Japanese auto makers who have always advocated "zero inventory" management, the Wenchuan earthquake may bring them a deep reflection because "zero inventory" means that if there is a supplier of parts and components that are not available in time, the OEM The production line will have to stop running.
Sichuan FAW Toyota and Guangzhou Honda are now busy repairing the supply chain torn by the earthquake.
Broken chain crisis
On the afternoon of May 17, the airplane of Guangzhou Honda executive deputy general manager Fu Shoujie arrived in Chengdu. He was the first CEO of a car company rushed to Chengdu to appease suppliers since the May 12 Wenchuan earthquake.
"After donating money to the disaster area at the earliest time, Fu always took the risk of aftershocks and personally went to Sichuan to learn about the damage of local suppliers." On May 21, Wen Yuzheng, head of Guangzho HNA General Office, told reporters It was confirmed that a Sichuan supplier producing a key component for Guangzhou Honda was damaged in this earthquake.
"I don't know what kind of parts are specific to you, but in order to avoid affecting follow-up production, the company is now looking for alternative suppliers." Wen Yuzhen said: When traffic jams and aftershocks continue, when suppliers in the affected areas can It is still unclear how to resume production and resume delivery to the host plant. “At present, the production of the Guangzhou Honda plant has not been affected by this, but the inventory of such parts and components is already in short supply.” According to another insider of Guangzhou Honda, “The suspension of such key spare parts will directly affect the Eight generations of Accord mass production, this is Honda's trump card against Toyota Camry."
The reporter learned from the official website of Guangzhou Honda that Fu Shoujie personally went to “Chengdu Tianxing Shantian Automotive Parts Co., Ltd.” to express his condolences to employees during the lightning strike on May 17 in Sichuan. Tianxing Yamada is the Guangzhou Honda in Sichuan. Is a key component supplier. The reporter then called the company several times, but neither the switchboard nor the president’s office telephone answered. A local government official in charge of the vehicle told reporters that due to the continuous aftershocks and the impact of logistics pressure, a number of local vehicles and parts companies were in intermittent production.
According to public information, Tianxing Yamada Co., Ltd., which is located in the Chengdu Economic and Technological Development Zone, is a Sino-Japanese joint venture and a manufacturer of parts and components controlled by the Japanese company. Previously, the company had been supplying key components for Wuyang Honda and other motorcycle plants. Later, it was “successful” and was listed as a supplier of Guangzhou Honda’s auto parts suppliers. Currently, it mainly produces oil pumps, gear boxes, automatic transmissions, crankcase covers, etc. Gearbox and other car core components.
"zero inventory" risk
“The company is actively discussing countermeasures to avoid the shutdown of the main plant production line due to suspension of production by suppliers in the quake-hit areas.” An insider of Guangzhou Honda explained that any OEM will find and sign an alternative supplier under normal circumstances. In order to ensure the normal production process during special periods (such as earthquakes and other irresistible factors interrupt supply).
The implication is that if suppliers located in the quake-hit areas can't resume delivery in the short term, Guangzhou Honda will launch an "alternative" option, which will require standby suppliers to supply the OEMs with the necessary spare parts. However, if it is not a type of component, but a variety of component supply at the same time the problem of not being able to supply in time, the host company's "alternative" program may seem to have lost a lot of money. Sichuan FAW Toyota Co., Ltd. in Chengdu has faced the reality of the temporary suspension of production of Costa Buses because its neighboring suppliers are in earthquake-hit areas.
“We have adjusted the production plans of different models to deal with the problem of partial supplier chain breakage so as to realize the resumption of production as soon as possible.” On May 21, Yang Min, head of Sichuan FAW Toyota’s General Administration Division, told reporters that due to a number of The suppliers for the passenger cars produced by Costa Motors are distributed in areas with severe earthquake disasters such as Dujiangyan and Mianyang. Therefore, after the official resumption of production on May 22, the production line will be mainly used to assemble Toyota PRADO Prado.
“The localization rate of Prado is not high, in which key components basically depend on imports, so as long as the logistics with the outside can be opened up, the production of the car in the Chengdu factory will basically not be affected by the earthquake.” Yang Min explained. Our reporter learned from the FAW Toyota Purchasing Department on May 17 that eight out of the eleven critical component suppliers of the Costa Bus were affected by the local suppliers after the earthquake, and the most critical ones were the impact of the earthquake. Bridge parts manufacturers are in Dujiangyan, the worst-hit area.
"Axles have only enough production inventory for one day. There are two days of man-made board inventory. The steering wheel is the most, but it only lasts three and a half days." For Toyota, which likes to reduce the waste of parts to the lowest level to reduce waste (Toyota in the world The factories are all trying to achieve a "zero inventory" goal. The sudden earthquake has made China's joint venture factories in China unprepared.
Local influence
Once there is a problem with a component supplier located upstream of the industrial chain, it will inevitably affect the downstream OEMs. However, if the part supplier also supports a number of OEMs at the same time, what are the consequences?
Located in the Economic and Technological Development Zone of Mianyang City, Huachen Ruian Automobile Parts Co., Ltd. is a supplier of engine camshafts for Shenyang Aerospace Mitsubishi Engine Manufacturing Co., Ltd.; at the same time, Shenyang Aerospace Mitsubishi is also the Great Wall, BYD, and Brilliance Jinbei. Mitsubishi 4G69 engines are supplied by a number of domestic automobile companies such as Southeast Mitsubishi and Changfeng. Affected by the earthquake, the production line of the Brilliance Mianyang factory was suspended for a time. The domino effect that this may cause is imaginable.
“The factory has gradually resumed trial production on May 15, but due to the continuous aftershocks in Sichuan provinces in recent days, employees' mood and production efficiency have been greatly affected.” Yang Lei, head of Brilliance Integrated Office, said that although the steel structure The factory building did not collapse, but the earthquake caused the accuracy of equipment such as lathes and grinders on the production line to be inaccurate. After technical experts repaired and tuned, the damaged equipment can now be put into normal use.
In addition, the reporter also learned that Sichuan Jian'an Axle Co., Ltd., the largest domestic manufacturer of micro-car rear axles, is located in Ya'an City, only 120 kilometers away from Wenchuan, and that the factories affected by the earthquake have been stagnant for a time, and its supporting OEMs such as Changan and Hafei , Changhe, SAIC-GM-Wuling, Chery, Geely, BYD, Dongfeng Junan, Beiqi Futian and Guangxi Liuzhou Automobile, etc. will all be affected.
Zhu Fengyuan, deputy director of the Sichuan Provincial Economic Commission’s Industrial Policy Division, said that the plant and facilities of automobile companies in Ya'an, Chengdu, and Mianyang, which are closer to the earthquake center Wenchuan, have also been damaged to some extent. “Due to the damage to the plant and the discontinued production, the losses suffered by these companies ranged from millions to tens of millions.” Zhu Yuanfeng told reporters that the National Development and Reform Commission and other industry authorities have asked local governments to take inventory of damaged automobile companies. Timely reporting.
Dong Jianping, deputy secretary-general of the China Association of Automobile Manufacturers, who is responsible for the parts and components industry, told the reporter that the domestic auto parts industry is mainly concentrated in the Pearl River Delta (Guangzhou), the Yangtze River Delta, Central China (Wuhan) and the Northeast (Changchun), and auto parts in the southwest region. The industry is based in Changan, the headquarters of Chongqing, which is the most densely populated base. Therefore, the parts and components industry in Sichuan affected by the earthquake may only have a partial impact on the national automobile industry chain.
“The impact of local car manufacturers on production will not be too great, and the impact of Japanese and Korean car companies will be even greater.” Dong Jianping, former deputy head of Beijing’s modern procurement division, believes that even with one type of parts and components, local car companies are also Often looking for more than two suppliers to support their own, so that suppliers can compete to reduce prices. "Japan and South Korea's companies are just the opposite in pursuit of economies of scale. They generally only look for one supplier for a certain type of parts and components."

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