Honda's Alliston, Ont., engine plantDeborah Baic/The Globe and Mail
Honda of Canada Mfg. has cancelled an overtime shift at an assembly plant in Alliston, Ont., and its parent company, Honda Motor Co. Ltd. and Toyota Motor Corp. have extended the shutdowns of their Japanese plants as the impact of the devastating earthquake, tsunami and nuclear crisis spreads.
Honda has also cancelled an overtime shift at a plant in Alabama, joining rival Toyota, which has put a halt to overtime at its North American plants as all Japan-based auto makers and other vehicle manufacturers try to determine how parts shortages will affect their operations inside and outside Japan.
"We're assessing literally day by day, as you can imagine," Richard Jacobs, a spokesman for Honda Canada said Tuesday.
The impact of the devastating quake has spread beyond Japanese auto makers to General Motors Co., which has temporarily closed an assembly plant in Shreveport, La., because of a parts shortage and has also laid off workers in Tonawanda, N.Y., who make engines for the trucks that come out of Shreveport.
U.S. and Europe-based auto makers rely on many of the same suppliers that ship parts - both large and small - to the Japanese auto makers, which is one reason why analysts expect the impact of the crisis to spread well beyond Japan.
"In the end, virtually every major OEM [original equipment manufacturer]will be affected by this disaster by mid-to-late April," consulting firm IHS Global Insight warned in a report earlier this week. "It is not a matter of if, but when."
The Honda plant in Ontario that is affected assembles the auto maker's compact Civic model, which has been the best-selling passenger car in Canada for the past 13 years. It is one of two plants in Alliston. A redesigned version of the car is scheduled to be produced in Alliston beginning later next month and a smooth launch is crucial amid soaring gas prices in Canada and the U.S. and slumping sales of the car during the first two months of 2011.
About 96 per cent of the vehicles Honda sells in Canada are assembled in North America and the vast majority of the parts used in them are also made in Canada, the United States or Mexico - including engines and transmissions - but some parts are shipped from Japan, Mr. Jacobs said.
The highest-selling Toyota Canada vehicles, including the Corolla compact and RAV4 crossover utility vehicles, are assembled in Canada, while others, such as the Camry mid-sized sedan, Tundra pickup and Highlander mid-sized crossover, are put together at U.S. plants.
In the Canadian market, the Mazda3 has the highest sales volume among vehicles assembled in Japan. Mazda Canada Inc. sold 47,740 of the cars last year.
Mazda reopened two Japanese plants Tuesday to produce parts and finish some vehicles that were on the assembly line last week when the earthquake hit.
The danger for the Japanese companies is a prolonged shutdown of their plants in Japan and elsewhere that eventually chokes off supply and sends customers to competitors.
"It may be some time before consumers are faced with the prospect of having to change their purchase decisions because a microprocessor or axle is not available for the vehicle they want," Moody's Investor Service said in a report Tuesday. "But if that time arrives, it will hit Japanese manufacturers harder and sooner than it will Ford, GM or Chrysler."
South Korean auto makers Hyundai Motor Co. and Kia Motors Corp. are most likely to benefit from a prolonged shutdown, in part because they are least affected by the disruption to the auto supply chain, Moody's said.