How the Japan earthquake is affecting you

Japan’s devastating tsunami and ongoing nuclear crises which continues to disrupt automobile production worldwide is also affecting the motorcycle business in unexpected ways - and as a motorcyclist it will soon affect you.

While pale in comparison to the loss of life, property and human hardship faced by Japan’s citizens, North America’s motorcycle owners are also being touched by this cataclysmic disaster. Worldwide the quake is costing both Japanese and non-Japanese producers millions in lost sales and productivity.

Parts supplies are proving to be an issue for autos and motorcycle builders alike. Modern vehicle manufacturing supply networks are interconnected, complex and, as the disaster has shown, highly vulnerable. Everyone knows vehicle manufacturers don’t make all their own parts but prior to the quake few people realized how far flung and multi-layered the "system" is.

Even though several months have passed and media attention has moved on, Japan’s vehicle producers are still having difficulty assessing the long-range effects on their suppliers.

One reason is that some of those suppliers don’t have the sort of factories you may think they do.

In space-constrained Japan, many parts companies including some auto and motorcycle suppliers rely on unique networks of “home-based” labor networks. Utilizing garages, outbuildings and even the kitchens of their diminutive homes, well-trained Japanese housewives, elders and neighbor groups supply a lot of the fine finger work to build piece-intensive small items like instrument clusters, master cylinders and other electromechanical components.

Supplier mini trucks deliver piece sets daily to Mama-San’s front door and collect the prior day's finished assemblies. It’s a system especially beneficial to the relatively short runs demanded by the motorcycle manufacturing sector and one of the ways Japanese companies overcome perpetually scarce industrial space and labor shortages. With an estimated 60,000 quake-destroyed buildings, assessing, replacing and adjusting these home-based supplier networks will take time and money.

The cost saving benefits of Japan’s legendary “just-in-time” manufacturing has been heavily hampered by the catastrophe. End producers in other countries, which rely on Japan, are affected as well. Developing new suppliers on short notice is tough anytime. For Japan, the prospect of rolling power disruptions, transport bottlenecks and possible nuclear contamination (such as a few Hyundais that arrived in Chile in May) will all adversely affect vehicle production costs for some time.

What it means for you

Before the quake, American motorcycle sales were improving a bit vs. last year but the industry is now feeling inventory constraints. OEMs and dealers of all stripes have decade-low inventory levels. Unit supply disruptions and the continued closing of economically embattled dealerships means OE sales incentives and dealer negotiating are going to be a lot less common for a while. Parts prices may go higher soon too.

Expect parts and accessory prices on all brands to increase at higher-than-normal rates. While you shouldn’t have trouble getting spares for an existing product, parts pricing will inevitably be the revenue generation go-to target as OEMs and dealers struggle to offset higher costs and lower unit sales. If you’re contemplating a major parts purchase or restoration job pull the trigger as soon as you can.

There is some good news. 2012 model prices will probably not increase disproportionally due to the quake. Lesser-affected American, and European brands will help keep a lid on hikes this year unless the dollar weakens further against the Euro. Your current ride is worth more now too. According to Powersports Business News and anybody watching Craig’s list or EBay action, Black Book and street values are going up on all motorcycle segments. Good used street bikes are fetching top dollar. Don’t be surprised to find local dealers bidding against you on private sale bikes. Dealers will probably give you more than you think though for your clean unit on trade or outright so don’t think your ability to get a new ride this year is gone. If you really need decision reinforcement for any street bike related investment these days, the current price of gas should continue to assure a good justification and payback.

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Tags: Manufacturing, industry