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Honda, Toyota looking to help troubled suppliers

December 30, 2008
Two of Japan's largest automakers are considering building parts inventories to prevent suppliers from sliding into bankruptcy, according to Bloomberg News.

Toyota Motor Corp., which has operated under the lean, just-in-time system since 1938, as well as Honda Motor Co. fear that the struggles of Detroit automakers could result in many parts makers going out of business and bringing their assembly lines to a halt. At least half of Toyota's suppliers in the U.S. also sell to General Motors Corp., Ford Motor Co. or Chrysler LLC.

One-third of domestic suppliers are considered to be at risk of bankruptcy, according to Grant Thornton LLP, a consulting firm.

Japanese car manufacturers are mainly concerned about small suppliers.

But stocking up on parts would be expensive for the big car companies because they would need to find warehouse space to house the additional inventory.

Still, memories of a July parts shortage in Japan are fresh. Eight of Japan's dozen automakers cut production by a total of 120,000 vehicles after a Japanese maker of piston rings, Riken Corp., was hit by an earthquake.

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