Explosion at Resin Factory Could Affect GM, Ford, Toyota and Others

By Matthew Askari | April 19, 2012
In the 1960s film The Graduate, the concerned Mr. McGuire gives Ben some advice: "I have just one word to say to you Ben: Plastics." If the film were to be made this week, the iconic catchphrase might be "resin." An explosion at a plant in Germany that makes a crucial ingredient involved in car production could affect GM, Ford, Toyota and other major automakers according to a Bloomberg report. The ingredient, PA-12, is used in a resin to make brake and fuel system parts. Just last year automakers had to deal with assembly issues as the March 2011 tsunami in Japan caused damage to factories there. Rod Lache, an analyst for Deutsche Bank AG in New York, said "indications are that near-term production disruptions are likely." Automakers and supply companies are looking into alternatives for the resin, but finding a satisfactory substitute could take some time. As Neil De Koker, president of the Original Equipment Suppliers Association indicated, "Brake lines and fuel lines are safety products, so you don't make changes overnight. You have to do them very carefully with the right testing to prove out the product."
One of the primary issues centers around centers around automaker supply-lines. Most automakers don't stock more than a two-week supply of parts. As observed following the disaster in Japan last year, production shortages can occur quickly and affect bottom-line sales and delivery of vehicles. While automakers have yet to announce any canceled production, executives are scrambling, looking for alternatives. Automotive.com's take: While last year's tsunami affected primarily Japanese manufacturers, this could be the start of a worldwide slowdown in production. The timing couldn't be worse, either. The global economy is already teetering between recovery and re-collapse, and it's no secret that the auto industry is a huge economic engine, if you'll pardon the pun. If an alternative source isn't found, and fast, it could spell disaster. Source: Bloomberg Businessweek