European Motor Industry Hit By Japanese Earthquake

Economists are all to familiar with the notion of exogenous shocks and how these unpredictable events can have devastating effects on an economy. When Japan suffered an earthquake, earlier this month, it not only affected the Japanese economy but also affected European countries. The European motor industry is a prime example of an industry that has been adversely affected by the quake. According to an article by Chris Reiter, that appeared in the Irish Examiner on Saturday March 26th, European car makers have been negatively affected by the earthquake in Japan as supplies of Japanese parts, for example semiconductors, become more scarce. Reiter states that "Volkswagen, PSA Peugeot Citroen and other European car makers may be forced to halt production in the coming weeks as component suppliers in earthquake-ravaged Japan struggle to restart factories." The head of Clepa car suppliers association, Lars Holmqvist estimates that this may result in "billions of euro" of lost revenue in the motor industry. Holmqvist also suggests that it may take "months" for normal productivity levels to resume. European workers in car production facilities are also feeling the effects of the quake. According to the article by Reiter "Peugeot , Europes second-biggest automaker, is temporarily reducing its workforce to reflect production cuts of as much as 60% resulting from a shortage of Hitachi Ltd diesel engine parts..." The article also reports that Opel were forced to cancel shifts in Spanish and German production plants. Carlos Ghosn, the chief executive of Renault and Japanese partner Nissan Motor Co. reported that some 40 Japanese auto-parts makers have been affected by damaged factories and transport routes. http://www.irishexaminer.com/business/car-makers-face-production-woes-as-quake-hit-japan-suppliers-struggle-149432.html