Automakers are scrambling to avert a shock to their global supply chain caused by a shortage of a critical resin used in car parts.
An explosion on March 31 in Marl, Germany at Evonik Industries, the German chemical maker, killed two people and took out one of the industry’s biggest producers of cyclododecatriene, or CDT. The material is used widely in PA-12, a nylon found in coatings and connector applications in cars’ fuel injection and braking systems.
In a sign of the seriousness of the crisis, automakers and suppliers held an unusual summit meeting in Detroit on Tuesday. They discussed the state of inventories and production capacity of the material, and sought to identify alternative materials or designs to offset expected shortfalls in supply.
“It is now clear that a significant portion of the global production capacity of PA-12 (nylon 12) has been compromised,” participants in the meeting said afterward.
The bottleneck highlights the negligible margin for error right now in the global automotive supply chain, which is running on lean inventories three years after the industry’s worst crisis in many decades.
It would mark carmakers’ third supply crisis in the space of a year. Last year’s earthquake in Japan and floods in Thailand wreaked havoc on some carmakers’ production by causing shortages of semiconductors, paint pigment and other parts.
General Motors, the industry’s largest company by reported sales, said that it had put in place a global working group comprised of purchasing and engineering experts and suppliers, including Evonik. “We are working to allocate and prioritise existing inventories and also find alternative process material solutions,” GM said.
Volkswagen, Daimler, Ford Motor, and Chrysler said that they had seen no impact at their plants yet.
The Japanese crisis was serious enough to impact overall car sales in the US in 2011 and hurt the earnings of manufacturers ranging from Toyota to PSA Peugeot Citroën.
After Tuesday’s summit, carmakers and suppliers said they had scheduled a number of follow-up meetings in coming weeks to mitigate the impact of the capacity shortfall on their operations.
Analysts said that automakers might struggle to find alternative materials or engineer new parts quickly. Because of safety concerns, the design of fuel-injection and braking systems is especially sensitive.
“Fuel, braking and engine components of this type are not easily reengineered,” said Michael Robinet, managing director of IHS Automotive Consulting in Northville, Michigan.
Evonik is one of the industry’s leading producers of PA-12. France’s Arkema, Ems-Chemie of Switzerland and Japan’s Ube Industries are its major competitors.
The German company said that it was making “every conceivable effort” to complete repairs on its plant, but that it did not expect them to be complete within the next three months.
“While we do expect there to be substantial constraints with respect to our ability to provide supplies of CDT-based product, we are nonetheless confident that we will be able to provide alternative solutions in the form of substitutes,” it said
The company is planning to construct a new PA-12 plant in Asia, but said this would not be ready for three years.
Even before the accident at Evonik, some automakers had been seeking alternatives to the material because of rising prices. PA-12 is also used in the manufacture of solar panels.