By: Dr. Mike Campbell

It is now more than three months since the cataclysmic earthquake and tsunami struck north eastern Japan. The natural disaster cost more than 26000 lives, wrought huge destruction to coastal communities in the vicinity, shattered the regional infrastructure and crippled the nation’s power supply. Many industries have struggled with supply chain issues and the problems of intermittent electrical power. The motor manufacturing industry was badly hit, both in Japan and in overseas production plants where component stocks were quickly depleted.

Japanese manufacturing output is beginning to recover from the disaster and, indeed, output has risen for the past 2 months. Government figures just released for May show a 5.7% increase in output. Car production figures still continue to fall, but the rate of decline has eased, at least. Toyota and Honda have been forced to suspend production, at times, because of the problems with their supply chain domestically and the rolling power cuts. Toyota’s production was down by 54.4% in May over the figure seen at the same time last year; however, this is in improvement for the comparable figure for April which recorded a 74.5% fall. Honda’s figures were similar with production dips of 53 and 81% for the same periods. Nissan managed to buck the trend and to post a 0.8% increase in production in May over the April figure which showed a 48.7% fall.

The plight of the Japanese automotive sector is such that Moody’s rating agency has cut Toyota’s credit rating from Aa2 to Aa3. Moody’s cited the strong Yen as a together with higher raw material costs and declining market share as concerns behind the downgrade.