Apr 07

The devastating earthquake and tsunami that hit Japan last month is slowly starting to have a bigger impact on U.S. manufacturing.

Toyota announced Monday that its North American plants would likely have to close later this month due to supply disruptions in Japan. Honda, Nissan and Ford have already announced temporary plant shutdowns and Chrysler could be next in line.

But the impact of Japan’s disaster on U.S. manufacturing has been vastly underestimated and goes far beyond the auto and electronics industries, says Alan Tonelson, research fellow at the U.S. Business and Industry Council and author of Race to the Bottom.

A new report by the Council found that “many of the highest rates of dependence on Japan are found in non-electronics capital goods sectors — industrial machinery and components vital to high-value production throughout the domestic U.S. manufacturing base.”

The report — entitled A Supply-Chain Earthquake? American Industrial Dependence on Japanese Manufactures — cites these market-share figures for the sectors unrelated to electronics and automobiles that come from Japanese imports:

  • Metal cutting machine tools = 21% of U.S. market-share comes from Japan
  • Turbines for generating energy = 14.8%
  • Metal-forming machine tools = 12.7%
  • Plastic and rubber making machinery = 11.2%

“If you go to most small- and medium-sized factories in this country in particular, you are going to see a wealth of foreign made machine tools many of which are coming from Japan,” Tonelson tells Aaron in the accompanying interview. “[Therefore] if we have supply chain disruptions due to the Japanese earthquake … that is likely to affect much of the advanced high-value manufacturing sector because these machine tools and bearings and forgings, etc. are such an integral of advanced manufacturing today.”

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