Crisis Stalls Japan's Toyota City As Automakers Wait

April 6, 2011

Jim Zarroli

Newly recruited Toyota Motor employees bow their heads in prayer for disaster victims at a ceremony in Toyota City in Aichi prefecture on April 1.
Jim Zarroli
"In order to make a car, all the parts have to be available," Okuda Industries President Kiyohito Okuda says. "We can be at full production here, but if plants in other areas are shut down and parts are missing, you can't make a car."

Like other Japanese manufacturers, Toyota has had to suspend production since the March 11 earthquake and tsunami. The impact is being felt acutely in Toyota City, where the company is based. Many small manufacturers there survive by selling parts to the automaker, and the shutdowns are already hurting the local economy.

Okuda Industries in Toyota City makes metal parts for transmissions and brake systems, parts that eventually make their way to Toyota factories across the globe, including the U.S. The company's president is 56-year-old Kiyohito Okuda, whose family started the company more than half a century ago.

"We have grown as Toyota has grown," Okuda says, "and as the automobile industry has boomed."

Okuda Industries is one of hundreds of small companies in the area whose fate is tied directly to the health of the giant automaker. Okuda says in one sense, companies like his have been relatively fortunate. Since the disaster, this city — more than 200 miles southwest of Tokyo — has been spared the energy shortages and transportation bottlenecks that have plagued other parts of Japan.

"This area is really far away from the disaster zone," Okuda says. "It is strange to say it, but it almost feels like that happened in another country."

Still, right after the disaster, he says, Toyota stopped placing orders because of production problems. Okuda's company, which employs 120 people, had to shut down for nearly a week. Production has slowly returned, but orders still aren't what they were.

"In the past when Toyota stopped production, it was only for a week or so, and it was much more gradual," Okuda says. "This interruption in production happened suddenly, and it has lasted almost a month. So this is a big concern for us."

All Toyota City's Businesses Feel The Squeeze

Other companies in Toyota City have fared even worse. The local chamber of commerce surveyed 230 parts manufacturers and many say they have had to curtail production because of the Toyota slowdown or because they've had trouble getting raw materials and supplies. The chamber's Yasutaka Kato says that's being felt all over the area.

"Toyota is a key industry around here, so when it slows production, it affects everything," Kato says. "People stop going out and spending money. Business people stop coming to town, so the hotels suffer."

At Tsubasaya, a restaurant near the Toyota City train station, business began to fall off right after March 11, according to owner Hironari Takanobu.

"We had a lot of large reservations and they were canceled after the disaster," Takanobu says. "People didn't want to spend money. Now fewer customers are coming in, and it hasn't gotten any better."

The End: Is It Near?

What makes the crisis especially challenging is how open-ended it is. Okuda expects to be at full production by the end of the month, but many other parts plants — especially those near the disaster zone — will take longer, and that is likely to have a ripple effect throughout the auto industry.

"In order to make a car, all the parts have to be available," he says. "We can be at full production here, but if plants in other areas are shut down and parts are missing, you can't make a car."

Okuda worries about how Toyota will respond if the crisis drags on. Over the years, the company has slowly shifted some of its factories to Europe and the United States. The danger for Toyota City is that the company will decide to protect itself from natural disasters by scattering parts production to more places. For a city so heavily dependent on the automaker, that would be a blow it might not recover from. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.