When a fire in the small town of Marl in the west of Germany closed down
an obscure chemical plant on 31 March, it barely made headlines.
Two people died and that was a personal tragedy for their families and
friends, but the shock waves did not resonate far beyond. Except, it
turns out, to the other side of the Atlantic - in Detroit, Michigan.
So tight is the global car industry's supply chain that one break in a
small link threatens the lot. About three weeks after the fire,
executives from the world's biggest auto-makers and their suppliers have
met with furrowed brows to take stock of the implications of the fire.
And they are serious.
It turns out that the braking and the fuel systems of cars depend on a
resin called PA-12. And PA-12 is made out of an inelegantly named
chemical: cyclododecatriene, or CDT. Evonik Industries' plant in Germany
was responsible for a good chunk of the world's supply - one estimate
put it between a quarter and a half.
The supply of PA-12 was already tight because it is also used in solar panels.
In addition, Evonik says that it will take at least three months and
perhaps longer before its damaged chemical plant can resume full
production. That has set off alarm bells throughout the car industry.
Earlier this week, more than 200 executives from companies including
General Motors, Volkswagen, Toyota and Ford met in Michigan. Under the
auspices of the Automotive Industry Action Group, six technical
committees were set up to assess the impact of the shortage and to seek
alternatives. The group said that it was clear that "a significant
portion of the global production capacity" had been compromised.
After the meeting, the big car companies were saying nothing on the
record. But some sources now say there is a real worry that the
potential impact could be serious, including a slow-down in production.
It seems odd to say, but the motor industry is seeking hope from last
year's tsunami, earthquake and nuclear disaster, which devastated
Japanese industry and highlighted how manufacturers everywhere rely on
component suppliers. At the time, one fear throughout the automotive
industry was that there would be a shortage of some colours of paint
that were produced by a plant in Japan that was destroyed. In the end,
alternatives were found. Choices were limited, but sales were not
impinged. Necessity was the mother of ingenuity.
But it is not easy to see an easy solution to the damage caused by the
fire and explosion at the German plant. One of the industry's research
bodies, IHS Automotive, says alternatives would have to be approved by
the authorities, and that is not done easily or quickly. "Given the
component testing and approval processes employed," it says, "it is
unlikely to be the work of a moment to find or develop a substitutable
alternative material."
According to IHS Automotive, the mood at the meeting of car industry
executives was "extremely serious and there was significant concern over
the potential for production disruptions in the component industry,
with obvious knock-on effects". The concerns come as the US car industry
starts to pick up after the financial crisis. On one industry
assessment, nearly 60 plants that supplied the automotive industry in
North America closed in the three years after 2008, with the loss of
about 100,000 jobs.
Sales of cars in North America dropped to their lowest in 30 years in
2009, but are now heading back up. This means that there was already a
worry about whether the suppliers of parts could keep up. And that was
before the fire in Germany threw a real spanner in the works.
Learning how to conduct a fire risk assessment on CRS's NEBOSH Fire and Risk Management Certificate might have helped.
http://www.bbc.co.uk/news/business-17769466
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