NISSAN AND THE JAPANESE AUTOMOBILE INDUSTRY.

business

Description

The year 2011 was tough for the Japanese automotive industry. A 9.0-magnitude earthquake and tsunami

followed by a nuclear crisis had ripped the country. The collective economic cost of the “3/11 disaster” as

estimated by the World Bank totalled around US$235 billion.2


In the automobile sector, production was


immediately stopped.3


In 2010, Japanese automakers had manufactured around 8.3 million passenger cars


in Japan.

4

IHS Global Insight, an international economic and financial consulting firm, forecasted that as a

result of the disaster, cumulative production for Japanese automakers in 2011 would drop by around 2.2

million units. Automakers Toyota, Nissan, Honda, and Suzuki were adversely affected and made their

respective recovery efforts. Of the top automotive firms, Nissan was acknowledged by analysts and industry

experts for the company’s recovery and resilience strategy.5

The catastrophe took place in March 2011. Nissan lost 17 family and five staff members. More than 50 of its

dealers6

and 40 of its component suppliers were damaged. Two of Nissan’s plants—the Tochigi engine and

vehicle assembly plant and the Waikiki engine plant—were severely damaged.7


Each day of lost production was


costing Nissan $25 million in profits.8


But, surprisingly, the Tochigi engine and vehicle assembly plant was

back on line in April, and the Waikiki engine plant was fully recovered with production back to pre-disaster

levels by mid-May.9


“Nissan was one of the companies, which have responded the fastest, and in the most

efficient way to what happened after the earthquake,” Carlos Ghosn, the chief executive officer (CEO) of

Nissan, exclaimed.10

NISSAN AND THE JAPANESE AUTOMOBILE INDUSTRY

Nissan Motor Company Ltd., based out of Yokohama, Japan, was the second largest automotive company

in the country. It employed approximately 248,000 people globally. In 2010, its annual sales exceeded 4.1

million vehicles. Its annual revenue in that year was around $102.37 billion (JP¥8.77 trillion).11 Nissan’s

Chairman and CEO was Carlos Ghosn, a French-Lebanese-Brazilian, and Nissan’s board was comprised

of members of different nationalities. This was different from the corporate structure of other Japanese


automakers whose board members were exclusively Japanese. Colin Dodge was the most senior non-

Japanese member on the board. He took over as Nissan’s Chief Recovery Officer in Japan. This post was


unique, not found at other automakers.12


For the exclusive use of R. Baczewski, 2016.


This document is authorized for use only by Rachel Baczewski in Ohio MBA-2 taught by Ashley Metcalf, Ohio University from August 2016 to January 2017.


Page 2 9B16D013

Nissan delivered a wide range of models—a total of 64—under Nissan and Infiniti brands. It exhibited a

strong commitment to developing exciting and innovative products. In 2011, Nissan earned several

international awards such as European Car of the Year and World Car of the Year.13 Nissan used common

parts on a global scale and standard parts worldwide. This practice resulted in low-cost manufacturing and

gave the company an advantage in dealing with the crisis situation.


The automotive sector was one of the core industrial sectors in Japan’s economy. In 2009, automotive

shipments alone accounted for 15.3 per cent of the total value of manufacturing shipments in Japan. The

value of the automotive shipments in that year amounted to $472.7 Billion (JP¥40.5 trillion).14 Japan was

the second largest vehicle producing country after China.


Because Japan was home to many innovative technologies in the automotive sector, suppliers got

“substantial and growing shares of the global market.”15 A motor vehicle consists of more than 15,000 parts;

lack of an important component can stop production or impede completion of vehicles, and result in a

slowdown or total stoppage of assembly lines.16


IMPACT OF 3/11 ON THE JAPANESE AUTOMOBILE INDUSTRY

The triple disaster in Japan disrupted both domestic and global supply chains. The most affected industries

were electronics and automobiles, both well-represented in Japan.17 Due to fuel shortages across the country

and power outages in the affected area of Tokyo, production and distribution were severely impacted, and

staff members were unable to reach their workplaces. Plant shutdowns in Japan disrupted the supply of

products—from semiconductors to automobiles—to manufacturers around the world.18


The foremost effect of the disaster, however, was suffered by Japanese automakers. Their assembly plants

were shut down for weeks. They assessed that Tier 1, Tier 2, and Tier 3 suppliers had been impacted.19

Supply chains of Japanese automakers were believed to be keiretsu—interlocked, with products procured

from Tier 1 suppliers being manufactured with parts procured from Tiers 2 and 3 suppliers. “We thought it

was pyramid-shaped, but it turned out to be barrel-shaped,” a Toyota official remarked post-disaster, noting

few critical suppliers at the base of the network.20


Many electronic component suppliers that supplied critical parts to automobile companies around the world

were unable to meet commitments. They soon realized that it would take them months to recover

completely.21 For example, Renesas Electronics, which provided 40 per cent of the global market for

microcontrollers for automobiles, was badly hit by the disaster and took more than a couple of months to

restart production. Renesas Electronics was the sole supplier of chips to all Japanese automakers.22

Until March 26, Toyota had suspended operations in 12 of its assembly plants, and estimated a loss of

around 140,000 vehicles.23 It stopped production in its U.S.-based assembly plants because of the

difficulties with shipping parts out of Japan. Similarly, Honda suspended production immediately after the

earthquake and continued the suspension for an additional two weeks. One-fifth of its Tier 1 suppliers had

been affected by the earthquake. The company announced that the suppliers would take more than a week

to recover operations.24


Nissan lost 1,300 Infiniti and 1,000 Nissan cars to the tsunami. All 2,300 vehicles were ready and waiting

to be loaded and transported to the United States.25 The company immediately closed five plants: the Iwaki

Plant in Iwaki City, the Tochigi Plant in Kawachi County, the Yokohama and Oppama Plants in Yokohama

City, and the Zama Operations Center in Zama City.


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