European Carmakers May Go Idle on Strained Japan Metals

Volkswagen AG, PSA Peugeot Citroen and other European automakers may be forced to halt production in coming weeks as component suppliers in earthquake-ravaged Japan struggle to restart factories.

The recovery to normal production levels may take months and cost the industry "billions of euros" in lost revenue, said Lars Holmqvist, head of the region's Clepa auto suppliers association in a telephone interview from Brussels yesterday.

"This will cause disruptions in Europe without question," said Holmqvist, whose group represents more than 3,000 companies. The effect on the carmakers will probably be felt in the next few weeks as local supplies of Japanese parts such as semiconductors and infotainment systems dry up, he said.

Some 40 auto-parts makers in Japan remain hampered after the nation's record earthquake damaged factories and transport routes, said Carlos Ghosn, chief executive officer of Renault SA (RNO) and Japanese partner Nissan Motor Co. More than 10,000 people have died in the country, which is also facing electricity shortages after a nuclear-power plant was crippled.

"The situation looks more serious than it did a week ago," London-based Morgan Stanley analyst Stuart Pearson said in a telephone interview. "What's surprising is that there isn't more dual-sourcing, and many European carmakers have yet to say what they can do with alternative suppliers."

Global auto output may drop by about 30% if parts plants affected by the quake don't return to operation within six weeks, said Michael Robinet, vice president of Lexington, Massachusetts-based IHS. Most major automakers will experience disruptions by mid-April because supply networks are intertwined, Robinet said yesterday.

German automakers have begun inquiring about government support for workers if they halt assembly lines because of missing components from Japan, said Anja Huth, a spokeswoman for the Nuremberg-based Federal Labor Agency.