News from Notch Consulting, Inc.

April 28, 2011

Supply disruptions boosting Korean automakers at expense of Japanese

Filed under: General, Tires — Notch @ 3:51 pm

Though the post-quake situation in Japan remains quite changeable, it appears that the parts disruptions currently plaguing Toyota, Honda, and other Japanese carmakers are benefiting Hyundai, Kia and other Korean vehicle producers, which were largely unaffected by the disaster, Reuters reports.

The magnitude-9.0 earthquake and the tsunami it triggered have disrupted the supply of hundreds of components from Japan’s northeast region, paralysing car production and reversing what had been shaping up to be a firm recovery from the financial crisis for Japanese automakers.

While the supply bottleneck of certain specialty parts such as microcontroller units made by Renesas Electronics Corp has also hit some automakers outside Japan, most of the pain is being inflicted on domestic brands such as Honda, where output remains at half the level planned before the quake. Honda and Toyota Motor have forecast a return to normal production by the end of 2011, but said they do not know how quickly volumes will pick up, making it difficult to assess their earnings for the business year that started this month.

Given the waiting periods that are expected to lengthen over the summer for buyers of Japanese vehicles, there is likely to be some loss of market share to competitors, including not just Koreans but also US and European automakers.

The earthquake has not only splintered the industry’s complex supply chain, but has forced a delay in vehicle launches.
Honda had been scheduled to begin selling a new hybrid station wagon based on the popular Fit subcompact in Japan a week after the quake, while Toyota has also postponed the launch of wagon and minivan versions of the Prius. But an even bigger worry is what the shortage of Japanese cars and the long wait for consumers would do to their market share in key regions such as the United States and China as some car buyers opt to shop at competing brands, one analyst said.

“Frankly, right now there’s no way to know how this will play out in the medium to longer term,” said Takaki Nakanishi, an auto analyst at Merrill Lynch Japan Securities. “While supply is tight through the summer, some sales will shift to other brands such as Hyundai. We’ll only start to get a sense of whether this trend is temporary or not towards the end of the year.”

Conti to build new tire plant in the US

Tire Business reported today (subscription required) that Continental A.G. is planning to build a greenfield-site tire plant in the U.S., Conti Chairman Elmar Degenhart told shareholders today at the firm’s annual meeting in Hanover. Specific details were not available.

April 22, 2011

Toyota production cuts may last through November

Toyota Motors has announced that its previously announced production cuts will last at least until November/December as the carmaker faces a parts shortage caused by last month’s earthquake and tsunami.

Toyota recently reopened its Japanese plants at reduced capacity

As TMC continues to address its production situation in Japan following the disaster, it has decided that vehicle production from May 10 to June 3 will proceed at approximately 50 percent of normal. TMC will decide on production after this period after assessing the situation of its suppliers and other related companies.

Today’s decision follows TMC’s previously announced decision to produce vehicles at all its Japanese vehicle-production facilities from April 18 to April 27 at approximately 50 percent of normal and for all production facilities to enter their annual spring holiday through May 9.

In North America, Toyota announced that previously announced production cuts would be extended to June 3, and that its factories in China would operate at 30-50% of capacity until that date. In addition, Toyota Motor said that production at its Japanese factories was likely to begin the recovery process by July, while its global operations will start to pick up speed by August. However a complete recovery in production levels may not happen until the end of the year, the company said.

April 17, 2011

Evonik Industries sells carbon black business to Rhône Capital

Filed under: Carbon Black, General — Notch @ 10:17 am

Evonik Industries AG announced today that is has agreed to sell its carbon black business to New York-based buyout firm Rhone Capital LLC for more than 900 million euros ($1.3 billion), including the assumption of certain obligations. The closing is subject to approval by Evonik’s Supervisory Board and competent antitrust authorities, and is expected during summer 2011.

Rhône Capital commented: “We are proud to succeed Evonik in stewardship of the Carbon Black franchise. We look forward to building on the foundation of Carbon Black’s globally acclaimed technology platform, valued customer relationships and skilled workforce, to support Carbon Black’s continued worldwide growth.”

“We will ensure that the transition to Rhône Capital takes place smoothly for our customers,” explains Thomas Hermann, head of Evonik’s Inorganic Materials Business Unit. The Group’s carbon black activities comprise 16 production facilities in eleven countries. Evonik Carbon Black is the global Number 3 in this market (behind the new Birla/Columbian business and Cabot). Carbon Black is being acquired intact as a whole, with its 1,650 employees, about 500 of whom are based in Germany.

April 15, 2011

Minor explosion reported at Evonik carbon black plant in Texas

Filed under: Carbon Black — Notch @ 10:33 am

The Record, the local paper in Orange County, Texas, reported this morning that there was an explosion at Evonik Engineered Carbons’ carbon plant in Orange, Texas on Thursday, which led to an injured person being transported to the hospital by helicopter. The unidentified, injured person was said to have suffered burns on the arms and facial area. The explosion was called minor and occurred shortly before 11:00 am on Thursday, April 14.

April 13, 2011

Looks like it will be Rhone Capital

Filed under: Carbon Black — Notch @ 12:47 pm

Bloomberg is reporting that Rhone Capital LLC, a New York-based buyout firm, is close to finalizing a deal to acquire Evonik’s carbon black unit for 900 million euros ($1.3 billion).

April 11, 2011

China’s new ghost towns

Filed under: General — Notch @ 12:12 pm

A fascinating and eerie report from Dateline Australia about China’s new ghost towns — massive infrastructure projects building cities that remain uninhabited. Article and more information here.

As gas prices rise, drivers cut back

Filed under: General — Notch @ 12:08 pm

From the Associated Press comes the news that everyone knew was coming:

With the price of gas above $3.50 a gallon in all but one state, there are signs that Americans are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves.

Gas sales have fallen for five straight weeks, the first time that has happened since November, according to MasterCard SpendingPulse, which tracks spending at 140,000 service stations nationwide.

In the United States, people are watching their local gas stations a little more carefully. Some are even getting rid of their old gas-guzzler.

Andrea Meyer of Manteno, Ill., has done both. She buys gas in the middle of the week because prices seem to jump over the weekend. And she recently sold her 2005 Chevy Envoy SUV and bought a 2011 Chevy Cruze, which gets 30 miles per gallon. She still spent about $200 on gas for the new car from mid-February to mid-March.

The question is whether the shift to more fuel efficient vehicles is a long term trend or whether Americans will go back to their SUVs as soon as gas prices come down, which is more or less what happened in 2010.

April 7, 2011

Reuters: Triton Capital and Rhone Group are sole bidders for Evonik Carbon Black

Filed under: Carbon Black — Notch @ 3:32 pm

On Tuesday, Reuters reported that financial investors Triton Capital and Rhone Group remain the sole bidders for the Carbon Black unit of German chemical maker Evonik, citing two people familiar with the transaction.

The deal is expected to be signed within the next ten days and will probably value the unit at about 1 billion euros ($1.42 billion) including assumed debt, the sources also said on Tuesday.

The financing of Carbon Black acquisition is set to follow a recent trend of using high-yield bonds rather than loans in leveraged buyouts, sources close to the deal told Reuters last month.

April 6, 2011

Toyota to idle North American factories

On Monday, Toyota announced it will shut down all of its North American factories due to shortages of parts from Japan. The temporary shutdown is expected to affect about 25,000 workers. The length of the shutdown is unknown and will depend on how fast Toyota’s parts plants in Japan, which supply some 15% of the components used by Toyota’s North American plants, can resume normal production levels. GM’s plant in Shreveport, Louisiana has also been idled due to supply chain problems related to the quake.
In the wake of these reports, Toyota issued a press release stating that,

Contrary to recent headlines, nothing has changed from our update from March 23rd regarding our North American operations.

We continue to assess our supply base in Japan following the earthquake/tsunami. We have communicated to team members, associates and dealers here that some production interruptions in North America are likely. It’s too early to predict location or duration.

Currently, the greatest majority of parts for our North America-built vehicles come from approximately 500 suppliers in North America. Also, we continue to receive parts from Japan that were already in the pipeline, limiting the immediate impact. We will continue to work closely with suppliers in North America and Japan to minimize any disruptions to Toyota’s overall North American operations.

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