IRVINE, Calif. -

With growing concern about parts and vehicle supplies — even radioactivity — analysts and automakers are still trying to get a handle on the magnitude of problems Japan’s earthquake and tsunami disasters are leaving on the industry now 10 days later.

Juan Flores, director of vehicle valuation at Kelley Blue Book, didn’t hesitate to state, “The earthquake and ensuing tsunami in Japan will leave a mark on the country that will not soon be forgotten. As Japan tries to rebuild, the world is only beginning to appreciate the significance of the financial implications of this disaster. Of particular interest is the effect on Japan’s auto industry. 

“Japan has traditionally been viewed as a powerhouse when it comes to automobiles, producing some of the most fuel-efficient and sought-after vehicles in the world,” Flores continued. “With gas prices on the rise, any interruption to Japan’s production capacity could have far reaching consequences in the United States due to the country’s reliance on Japanese automobiles.

“Most notably, a drastic reduction in the supply of vehicles being imported from Japan could increase the price of vehicles from Honda, Toyota, Nissan, Subaru and all other Japanese manufacturers,” he added.

As previously reported by Auto Remarketing, Toyota halted production of their plants until at least today, and Flores estimated the company lost production of 40,000 vehicles. 

While Nissan and Mitsubishi resumed operations sooner while closely monitoring the situation, Honda was expected to start up production again over the weekend.

The length of time production will remain down for these brands will give the best indication of the long-term implications to the health of these companies,” Flores surmised.

“If production is resumed in a short period of time, the overall impact to the supply and ultimate price of Japanese vehicles should be relatively minor,” he indicated. “Even a shutdown lasting two to three weeks could be overcome by adding shifts and increasing production once facilities are up and running.”

Currently, KBB thinks Japanese automakers are maintaining an average of 61 days’ supply of inventory.

“So in the short run, it appears as though there are enough vehicles on dealer lots in the United States to withstand a short-term production cutback,” Flores stressed.

“The bigger concern is if production is shut down for an extended period of time, perhaps one month or longer,” he cautioned. “In this scenario, supplies of vehicles imported from Japan could start to dwindle and prices could rise dramatically. Perhaps most impacted will be the price of fuel-efficient hybrids and compacts, which already have seen an increase in demand as gas prices have been on the rise. 

“In this case, prices would rise not only for Japanese imports, but for Hyundai, Ford, GM and other manufacturers that would see increased sales as a result of the reduced supply of Japanese imports,” Flores pointed out.

“Long-term power outages, damage to Japanese infrastructure, and the potential radiation resulting from a potential meltdown at Japan’s Fukushima nuclear plant are all factors that could potentially contribute to a long-term production cutback for these automakers,” he added.

Nissan Monitoring Radioactivity Levels

As Flores mentioned radiation, Nissan touched on the subject in its most recent update about its Japanese operations.

“Nissan Motor Co. initiated the monitoring of vehicles made in Japan for any traces of radioactive material,” company officials explained.

“Looking ahead, we will continue to implement all appropriate measures to reassure the public that all products from our company remain within globally accepted safety standards and until we are confident that any risk of contamination is completely removed,” they insisted.

Along with the pledge to monitor any potential radioactivity, Nissan Americas has offered $1 million to the American Red Cross in relief effort support for Japan.

That amount raised the automaker’s overall contribution to more than $3.75 million — including the provision of 50 vehicles to support aid agencies in the hardest affected areas.

Quake’s Effects on Incentives

Returning back to how the disasters might alter life in the dealer showroom, Kelley Blue Book expects incentives to remain attractive for many Japanese vehicles.

However, if the production halts go on for a month or longer and gas prices continue to rise, KBB thinks Japanese manufacturers will begin to roll back incentives since there will be few vehicles available in the marketplace for consumers. 

“In this case, Kelley Blue Book would advise consumers to either hold off on their purchase, or to seek an alternative from a competing manufacturer,” Flores recommended.

“Be warned though, with a lack of Japanese vehicles in the marketplace, prices for nearly all alternatives will be on the rise as well,” he cautioned. “Even in a prolonged production cutback scenario, Kelley Blue Book would expect prices to come back down in the long run, so consumers may be best served by holding off their purchase if prices begin to rise.”

Once production is resumed whenever that may be, Flores thinks Japanese manufacturers will pump up production and increase incentives, driving prices back down.

“This also will satisfy any pent-up demand that may have built up among American car shoppers, and should balance out the annual sales figures for the auto industry as a whole,” Flores shared.

TrueCar.com Offers Latest Take on Quake Ramifications

Jesse Toprak, vice president of industry trends and insights for TrueCar.com, also took a deeper dive into the impact of the earthquake and tsunami on vehicle pricing in the U.S.

“Almost all vehicles that have been affected by the loss in production will have an increase in transaction price,” Toprak noted. “The vehicles that will have a more significant increase will be hybrids and the more fuel-efficient vehicles.”

TrueCar.com also took a similar stance about how production issues could spill over to incentive strategy.

“Japanese automakers will lower or eliminate all incentives for vehicles being affected by the earthquake/tsunami while increasing incentives on models where production isn’t being hardest hit,” Toprak stated.

“The rest of the industry will not be affected immediately from pricing and incentives,” he continued. “The real impact will be felt when inventory starts to run out, some as soon as the end of March, but most toward end of April. If most of these vehicles affected have prolonged shortages, transaction price will increase as lower supply of consumer buying power due to relative improvements and continued easing in leasing standards.”

To frame a reference by using February sales as a guide, TrueCar.com calculated that models connected closest to the Japan crisis made up about 17 percent of the month’s total or approximately 170,000 units.

“The biggest unknown currently is the potential shortage of parts model in Japan for vehicles made elsewhere,” Toprak stressed. “This could have major global impact on global output, at least temporarily.”

Chrysler Makes Contribution for Japan Relief

The Chrysler Foundation announced last week it will donate $100,000 to the American Red Cross for Japan disaster relief efforts. Additionally, the foundation will match employee and dealer Red Cross contributions up to an additional $100,000.

“Our hearts go out to the people of Japan,” said Jody Trapasso, president of the Chrysler Foundation

“We are confident that Chrysler employees, contractors and dealers will once again respond to help others in need, which is why the foundation will also match their generous contributions,” Trapasso added.

The Chrysler Foundation emphasized that it has a long history of providing humanitarian aid throughout the United States and the world.

Within days of the Sept. 11, 2001 terrorist attacks, a $10 million Help the Children Fund was established for the children of victims. Chrysler employees, retirees and dealers raised another $400,000 for the scholarship fund and many employees worked at the recovery site or collected donations of supplies.

Following Hurricane Katrina in 2005, the foundation contributed $550,000 for disaster relief, including $150,000 in matching funds. Officials recalled the donations were distributed to the American Red Cross, The United Way and food banks in Alabama, Louisiana and Mississippi. The company also donated 100 vehicles and supplies, collectively valued at $4.4 million.

Furthermore, the foundation also provided $100,000 for flood relief and cleanup programs in Cedar Rapids, Iowa, in 2008, and $100,000 for wildfire disaster relief in San Diego in 2007. Officials pointed out both of these initiatives also involved volunteers and in-kind support from Chrysler dealers.

Finally last year, the foundation mentioned donations of $100,000 and $50,000 each to Oxfam America and the United States Fund for UNICEF to support humanitarian relief and recovery efforts in Haiti after that country’s devastating earthquake. Also, the foundation contributed $50,000 to the village of Dundee, Mich., and another $50,000 to ISOH/Impact in Perrysburg, Ohio, for relief efforts following severe tornadoes that hit Michigan and northern Ohio.

AIADA Emphasizes Dealer Donation Opportunities

Jim Smail, the chairman of the American International Automobile Dealers Association, listed several ways foreign nameplate franchise dealers can steer funds and resources toward Japan earthquake relief.

With the objective of benefiting the American Red Cross’ earthquake and Pacific tsunami victims’ fund, Smail mentioned several initiatives connected with specific brands.

—Honda and Acura dealers can donate through this link. The deadline to donate is April 15, but AIADA thinks that deadline may be extended.

—Nissan and Infiniti dealers can give through this link. The association pointed out Nissan Americas will match, dollar-for-dollar up to $500,000, the contributions made by visitors to the online site.

—Toyota, Lexus and Scion dealers can give through this link, which will be open until April 18. AIADA noted dealers should identify their store on the application in the company/organization field by listing their five-digit dealer code, followed by their dealer name.

—Subaru dealers can donate through this link. From now until April 1, AIADA indicated Subaru will match donations made to this site, up to $100,000.

“Like many Americans, I have spent the last week absorbing the news reports from Japan and struggling to understand the massive scale of the disaster unfolding there. As we watch the tragic events from half a world away, we are stunned by the devastation and suffering,” Smail began.

“The Japanese people are not just our allies. For AIADA’s dealers, they are also our business partners and dear friends,” the chairman insisted. “The American arms of our Japanese manufacturers have already donated generously to relief efforts. I am not at all surprised that many dealers have contacted me looking for ways to do the same.

“Thank you for participating in this relief effort,” Smail went on to say. “Like many of you, I have always been awed by the warmth, generosity, and hospitality I have received from my Japanese friends. Now, in their time of great need, I am certain that their American friends will return that kindness and support.”

DCH Auto Group Gives Toward Japanese Response

DCH Auto Group, based in South Amboy, N.J., joined the humanitarian efforts to aid victims in Japan by making a $20,000 donation to the American Red Cross, as well.

“Our deepest sympathy goes out to anyone who has been affected by the terrible earthquake and tsunami in Japan,” stated George Liang, president of DCH Auto Group.

“Our donation to the American Red Cross, helping the victims of this improbable disaster, is an extension of DCH Auto Group’s unyielding embrace of the tenants of corporate citizenship,” Liang continued.

Shau-wai Lam, chairman of DCH Auto Group, added, “We know that our actions speak to the very essence of who we are. Times like this define us and allow us to serve those who are most in need."

DCH Auto Group owns and operates a wide array of franchise dealerships, including Acura, Audi, BMW, Chrysler, Dodge, Honda, Jeep, Lexus, Nissan, Scion and Toyota. The 27 stores are located in southern California, Connecticut, New Jersey and New York.