USA TODAY - After selling lots of cars, reveling in higher prices and profits, the U.S. auto industry faces a real threat this morning: a potential shortage of resin, a key component used to make fuel lines and brake lines, that could shut down factories.
Actually, it's not just a U.S. problem, but one that could reverberate around the world.
The Associated Press says automakers are meeting today to discuss the problem in Detroit. As tense meetings go, we expect this one to be right up there.
The AP says the shortage stems from a March 31 explosion at a single plant, Evonik Industries in western Germany, that killed two workers and damaged a factory. The plant makes CDT, a chemical that is a key component in a nylon resin called PA12, which is used to make a specialized plastic. The plastic is used in auto fuel lines and brake lines, the AP says. It is also a component in solar cells, pipelines, sporting goods and household items.
The AP goes on to say:
Automakers aren't pushing the panic button yet, but they are concerned.
General Motors said Monday that some of its parts suppliers are affected, and GM has set up a global team to allocate existing parts and find alternate materials. Spokeswoman Kelly Cusinato said it's too soon to predict the impact of the shortage.
Ford Motor and Chrysler Group said they haven't had any factory disruptions, but are monitoring the situation.
"The shortage is real and immediate," TI Automotive Chairman and CEO William Kozyra wrote in a memo to customers last week. "The possibility of production interruptions at some of your facilities in the next few weeks is high."
TI Automotive is a major supplier of fuel lines and other parts. TI and the Automotive Industry Action Group, a trade association, are organizing Tuesday's meeting of auto industry executives.
Evonik is a major supplier of the resin. While a small number of other companies also make it, they could lose a key building block in the formula, since Evonik supplies many of them with the essential ingredient CDT. Auto parts makers can't switch to another chemical quickly because it would need to be thoroughly tested, said J. Scot Sharland, executive director of the Automotive Industry Action Group.
The particular resin has been in short supply for about two years, as demand from the solar industry increased. The Evonik incident will worsen the shortage, which could hit every major automaker, Sharland said.
"These guys are a major player. As such, the supply of the material is going to be compromised," he said, adding that the Evonik plant is expected to be out of commission for months.
The blast at the German plant came a little more than a year after the earthquake and tsunami in Japan wreaked havoc on the automotive supply chain. In that case, there were no alternatives to Japanese suppliers of specialized electronic equipment, and automakers lost hundreds of thousands of vehicles while they worked to reestablish supplies.
In this case, there are other suppliers, but not many:
Paul Blanchard, a senior principal chemical analyst at consulting firm IHS, said there are only three or four other suppliers of the key ingredient in the resin in the world. Evonik and French chemical company Arkema together make nearly half the world's supply of the nylon resin.
"This is a very small part of the small plastics industry," he said.
Blanchard said automobile fuel lines were previously made of rubber. Carmakers switched to other materials when ethanol was added to gasoline in the 1990s because ethanol ate through rubber tubing. Tubing made with PA12, or Nylon-12, is prized for its strength and heat resistance.
Blanchard said the auto industry has been looking for materials to replace the resin because the ongoing shortages of it have caused prices to spike in the last two years.
