Japan quake may hit component supplies to JLR

Jaguar Land Rover Plc, the wholly-owned subsidiary of Tata Motors, India's biggest vehicle maker, has said it could face supply disruptions following the recent earthquake and tsunami that hit Japan, crippling the local auto parts industry.

JLR is the latest in the list of companies which have announced a likely impact on operations due to crunch in auto component supplies from Japan. Toyota, the world's biggest car maker, followed by Honda and Nissan, among several other Japanese automotive brands, have cut production by more than a third since the component shortage crisis began.

Tata Motors (TML) stated in a disclosure to the United States' Securities and Exchange Commission (SEC) yesterday: "TML is monitoring the impact of the recent disasters in Japan. There is a risk JLR may face supply chain disruptions in future."

The two UK-based brands that make luxury sedans and sports utility vehicles, however, also clarified, "At present, JLR has not suffered any production shut-downs or delays due to supply chain disruptions. However, the situation in Japan continues to evolve."

It remains unclear what kind of components are imported by the two brands from Japan. An email seeking clarification from Tata Motors and JLR remained unanswered.

In March, a high-intensity earthquake had struck Japan's north eastern region, triggering tsunamis. It resulted in large-scale destruction of several industrialised areas, which also housed factories of numerous auto part makers.

This forced Honda and Toyota to delay launches and cut production in many countries, including India, as supply of certain components whose manufacturers were based out of the quake-stricken areas remained affected.

JLR operates through three factories in Britain. It procures engines and transmissions from American automaker Ford Motor Company.

Following a surge in demand from newer markets and also after securing what it called 'a landmark pay and conditions deal', Tata Motors had scrapped its original plans of closing one of the three plants, based in the West Midlands, last year.

JLR had posted a 30 per cent increase in wholesale volumes in the nine months ended December 2010 at 177,490 units, as against 136,978 units in the same period a year before. This was achieved after demand from non-traditional markets such as China and Russia increased substantially.

Although the two brands have made arrangements for raising output at the UK plants, Ford hasn't been able to match with demand due to shortage in supplies of some critical engine or transmission components.

To reduce its dependence on developed markets, JLR started to procure more parts from developing markets, including India. The other country in the list was planned to be China. Local assembly plans have been made in both the countries.