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Japan Earthquake Causes Parts Shortage, Closing 4 GM Plants

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The earthquake in Japan earlier this month has impacted the supply chain of General Motors, causing four plants in North America to close temporarily because of a shortage of parts from Japan, the company reported.

GM said in a statement that its manufacturing operations are expected to be down for two weeks beginning April 25 in Spring Hill, Tennessee; Lordstown, Ohio; Fairfax, Kansas andGM logo the Oshawa Flex Assembly in Canada.

The temporary adjustment is not expected to have “any material impact on GM’s full-year production plans in North America,” GM said. In addition, the company “does not expect a material impact to its second quarter or full-year financial results for GM North America.”

Japan’s Kyushu Island was rocked by a 7.0 temblor on April 16, killing 58 people and injuring about 900, according to AIR Worldwide. The quake was the strongest to strike Japan since 2011, when a massive 9.0-magnitude offshore earthquake unleashed a tsunami that killed 18,000 people in the country’s northeast and triggered meltdowns at a nuclear power plant in Fukushima, the New York Times reported.

AIR said the earthquake is expected to result in insured losses between $1.7 billion and $2.9 billion. Those losses only reflect insured physical damage to onshore property (residential, commercial/industrial, mutual), both structures and their contents, from ground shaking, fire-following and liquefaction, AIR said.

The Japan Fire and Disaster Management Agency (FDMA) estimates that more than 3,900 residences and 120 non-residential buildings were damaged or destroyed, a number of mudslides resulted, and 14 fires were attributed to the temblors.

On the same day, April 16, a 7.

8 earthquake struck the central coast of Ecuador, killing 570 people and injuring more than 4,700. AIR estimates losses from that quake between $325 million and $850 million. More than 1,100 buildings are reported to have been destroyed and more than 800 damaged.

Even though they happened just hours apart, the two quakes are not related. The Times reported:

Are the two somehow related?

No. The two quakes occurred about 9,000 miles apart. That’s far too distant for there to be any connection between them.

Large earthquakes can, and usually do, lead to more quakes — but only in the same region, along or near the same fault. These are called aftershocks. Sometimes a large quake can be linked to a smaller quake that occurred earlier, called a foreshock. In the case of the Japanese quake, seismologists believe that several magnitude-6 quakes in the same region on the previous day were foreshocks to the Saturday event.

Crisis in Egypt: The Economic Repercussions

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The crisis in Egypt can soon turn from a political uprising to an economic catastrophe and humanitarian emergency if things don’t return to normal operation soon.

Shipping

In the port of Alexandria, among others, army tanks stand guard to ensure no one enters the area. Good plan, except that hardly anything is going out, including exports that are crucial to the country’s economy. Though reports claim that some ports are closed, the Suez Canal is apparently open to shipping traffic. Shipping companies, however, are hesitant to enter the area. If the Suez Canal should close, it would not only spell disaster for a country already in serious turmoil, but it would also mean a worldwide shipping disruption.

Production Plants

  • Nissan: the automaker suspended operations Sunday until February 3rd.
  • Unilever: the multinational corporation’s offices in Cairo have been closed since January 28th.
  • General Motors: the car maker’s plant near Cairo has not produced vehicles since January 28th with production estimated to resume Friday, February 4th.
  • Lafarge SA: the a French building materials company has temporarily stopped operations due to the situation. The company has six production sites in Egypt, six quarries and 62 ready-mix plants and employs 8,172 Egyptian workers.
  • Heineken NV: the Dutch brewer has halted operations and told its 2,040 employees in Egypt to stay home.

Tourism

The nation’s tourism sector has taken a huge hit that is expected to last for some time.

Foreigners are struggling to flee the country, tour and cruise companies are seeing cancellations and a growing list of Western and Arab nations are sending in flights to evacuate their nationals. The tourism sector is vital for Egypt — and is among one of the four top sources of foreign revenue for the country.

Tourism accounts for 5 to 6% of the country’s GDP, while Cairo International Airport is the second largest airport in Africa, after Johannesburg, handling 15 million tourists per year.

Call Centers and Online Retail

Egypt is home to numerous call centers and IT outsourcing companies. But little can be done when the government cuts internet access throughout the entire nation. Microsoft is just one of the 120 companies in Cairo’s Smart Village, an area built for major multinational and local, high-tech companies.

Asked about the situation in Egypt, Microsoft said in a written response to a query that it “is constantly assessing the impact of the unrest and Internet connection issues on our properties and services. What limited service the company as a whole provides to and through the region, mainly call-center service, has been largely distributed to other locations.”

Hewlett-Packard is another company with operations in the Smart Village. They have asked their employees there to stay home. Though President Obama has urged the Egyptian government to restore internet access, little has changed for fear that protesters will use social networks to organize further riots. For a country that has taken pride in its growing outsourcing and call center business, the suspension of internet access is taking a huge toll.

All of the above have affected financial markets worldwide. And with a “million man march” planned for tomorrow in the Arab world’s most populous nation, little is expected to change in the near future.