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Natural disasters: Why the automotive industry is becoming more and more vulnerable

Nils-Viktor Sorge

Manager Magazin online

12 June 2013


PA has commented on the impact of natural disasters – such as the recent floods in Germany – on the automotive sector.

The article explains that the floods in Germany disrupted production for Porsche, Volkswagen, ZF and others. While the companies can cope with the immediate impact of one-off events, the series of natural disasters seen in the last few years suggests that they could be facing a dangerous trend in the long term. Car makers have been affected by the earthquake and tsunami in Japan 2011; flooding in Thailand in the same year; and Japanese car manufacturers even faced trouble in the Philippines as a result of flooding in Thailand. However, the recent floods in Germany show that this issue is not limited to Asian automotive companies.

PA says: "The industry is becoming more vulnerable. The network of sites and supply chains across the globe means the system is fragile in the face of natural disasters." 

Continuing, the article argues that manufacturers should be more careful about where the factories of their suppliers are located. Knowing the risk and sharing it is crucial to reduce the cost impact of a natural disaster, particularly as far as the jungle of supplier networks is concerned.

PA agrees that the location of a plant should be a key consideration in the planning process: "In Germany, we see floods every few years now; in the US we see increasing hurricanes; in Asia tropical cyclones and floods, too. The risk of location is much more relevant and important than political or social stability in a country." 

While PA does not expect a fundamental shift in the industry landscape, some plant locations may be decided differently in the light of direct exposure to rivers: "Today ZF would not build their plant as near to the Danube in Passau".  


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