A Risk of the Just-In-Time Supply System
THE EXPLOSION AT AN EVONIC INDUSTRIES chemical plant in Marl, Germany, on March 31 may lead to a severe cutback in automobile production world-wide. The destructive blast in the Marl Industrial Park (reported in Firegeezer HERE) has shut down the portion of the plant where a chemical Cyclododecatriene, also known as CDT or PA-12, is produced.
Reuters
This chemical is a vital component of a specialized resin that is used in making automotive brake, brake lines, fuel lines, gas tanks, and several other related products. Evonic Industries makes about 50% of the world's supply of CDT and the stock on hand will run out in a few months. Executives from the world's largest automakers are meeting today (Tuesday) in Detroit to discuss finding alternative sources or even different products that may be safe enough to replace the CDT-based parts.
Businessweek is reporting today (in selected quotes):
At stake is whether automakers can keep assembling cars and trucks after another breakdown in supply chains that are stretched taut around the world to minimize investment and parts inventory.
TI Automotive Ltd. warned its customers in an April 12 letter of severe shortages interrupting production "in the next few weeks." The Auburn Hills, Michigan-based company supplies brake and fuel lines, as well as fuel tanks and pumps, to all major automakers, including General Motors Co., Ford Motor Co., Toyota Motor Corp. and Volkswagen AG according to its website.
While automakers and their suppliers have reacted quickly, it may be difficult for the industry to find a solution in time to avoid losing production because of the nature of the parts that use CDT and PA-12, De Koker said.
"Brake lines and fuel lines are safety products, so you don’t make changes overnight," he said. "You have to do them very carefully with the right testing to prove out the product."
OregonLive
Evonik has begun repairs at its factory in Marl, Germany, Ruben Thiel, a spokesman for the Essen, Germany-based company, said in an e-mail. "Every conceivable effort" is being made to rebuild the plant "before winter," he said. Evonik plans to add capacity in Asia, (but) a new factory won’t be ready until the end of 2014.
Other makers of PA-12 are France’s Arkema SA (AKE), Switzerland’s Ems-Chemie Holding AG (EMSN) and Japan’s Ube Industries Ltd., Thiel said.
Read the entire Businessweek article HERE.
One international automotive organization is predicting that the shortage will "likely be serious." The Detroit Free Press adds:
IHS Chemical analyst Paul Blanchard said in a report that Evonik wouldn’t regenerate production capacity for at least six months, leaving the auto industry scrambling to find substitute parts for a resin that was already in short supply.
"The ability of Evonik and Arkema to find alternate sources of CDT is very limited and it is doubtful that the CDT shortage can be made up," Blanchard said. "In the short term auto and truck production will be affected."
Read more in the Detroit Free Press HERE.
Daily Finance has a unique view of the situation HERE.
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