Toyota Announces They Will Shut Down North American Factories

Facing a parts shortage due to last month’s earthquake and tsunami in Japan, Toyota announced earlier today that they will likely shut North American factories.

The shutdown is said to be temporary, but also unknown is for how long the shutdown will last, and will affect about 25,000 workers here in the United States. All of which depends on how quickly the Japanese auto parts makers can get back to business.

Honda Motor Co. and Subaru of America also stated they would slow U.S. production to conserve parts as well.

Production of certain parts are not expected to resume for at least 30 days in a company memo to dealers and added, "Both the number of affected parts and length of production stoppage may increase."

The disaster in Japan, although exceptional in scope and size is an example how vulnerable our supply chains are. In our globalized world, everything is tied together and companies MUST do a better job at redistributing the risk of their supply chains, and it needs to happen quickly.

Large scale regional natural disasters are also tied to the globalized economy and this one will likely impact the overall recovery of the American economy which will further impacting the global economy yet again.  

Ironically, in the January copy of Reinsurance Magazine the article – World Cannot Take Another Crisis Global Leaders Warned and it points to the need to “solve future global risks before they become crises” and that “Twentieth century systems are failing to manage 21^st century risks.” More can and should be done to manage our risks.