General Motors and Chrysler may have sidestepped bankruptcy via a $13.4 billion emergency loan, but some foreign automakers still have the two on life support. Because Toyota and Honda think bankruptcy could be a possible outcome for two of the Big Three, the Japanese automakers are considering altering their supply lines.
Like most manufacturers, Honda and Toyota both use a ‘just-in-time’ manufacturing system, but could be planning a supply chain shift in order to safeguard against a Big Three bankruptcy.
Roughly 50 percent of Honda and Toyota ’s U.S. supplier base is shared with the Big Three, which has the Japanese automakers concerned about a Detroit bankruptcy. If either GM or Chrysler were to fail, it would mean more bankruptcies at the supplier level, which would interrupt supply lines for the whole industry.
In order to prevent a Detroit bankruptcy from wreaking havoc on the manufacturing process, both Honda and Toyota are considering switching from a JIT system to an inventory system. Although housing inventory is more expensive than using JIT – due to the need for warehouse space – it could prevent a disruption in the manufacturing process.
“We continue contingency planning even after the bailout,” Mike Goss, a spokesman for Toyota’s North American manufacturing unit in Erlanger, Kentucky, told The Detroit News. “We hope the loans provided to Detroit will also help to stabilize suppliers, but the very slow market remains a concern for all.”
Toyota and Honda haven’t made an official decision on whether to rely more heavily on an inventory system, but if the situation continues to worsen in Detroit, expect an announcement on the matter in the coming months.
