Japanese Industry Laid Low by Disaster

Japan's 12 automakers stopped all their assembly lines on Monday for the first time in the history of the island country's auto industry. Toyota said it will halt production at least until Wednesday but is uncertain when its assembly lines will run again.

But car plants away from the Tohoku region that was hit hardest by the earthquake and tsunami also halted operations due to the organizational structure of the country's automotive industry.

Japanese carmakers have maintained minimum inventory with a method known as "just-in-time" delivery where parts are received when needed without piling them up in warehouses. But the earthquake dealt a severe blow to parts makers clustered around the Tohoku region, smashing the tight network of distribution from parts makers to finished car manufacturers.

The disaster hit the car industry just when it was about to emerge from the impact of the 2008 global financial crisis, a strong yen and massive recalls in 2009. Toyota shares dropped 7.9 percent on Monday, while other Japanese carmakers' stocks fell 6 to 11 percent. Monday's drop in Toyota shares was bigger than the 5.7 percent decline on Feb. 2 of last year at the height of the recall crisis.

Japan's other major industries were also hit. The electrical, electronics, petrochemical and steel industries have also halted production. Petrochemical plants in Miyagi and Chiba prefectures have shelved plans to resume production, and industry insiders forecast it could take up to six months for operations to return to normal. The losses suffered by Japan's oil refineries as of Monday total 890,000 barrels or 20 percent of the country's total refining capacity.

Electronics makers like Sony and Toshiba are unable to determine when their plants will resume operations. Canon and Nikon, two of Japan's largest camera makers, have halted production in the Kanto and Tohoku regions. Nissan, whose headquarters is in Yokohama, ordered all staff on Monday to remain at home on standby.

Petrochemical company JSR has told workers having a tough time commuting to take paid leaves. Five days have passed since the earthquake, but the authorities are having a difficult time assessing even the exact damage, and it appears that more and more industries will have to halt production in the coming days. Insurance analysts estimate that coverage could rise to as much as US$15 billion, making the earthquake the costliest ever.