Japan woes set to hit Europe auto sector-analysts

* Worst-case scenario seen at total shutdown of 2-4 weeks

* Pretax hit from 4-week shutdown 2.4 bln eur – Commerzbank

* PSA, Fiat could be hit hardest – analysts

* Some say shutdown may be offset by flexible working hours

By Maria Sheahan

FRANKFURT, March 25 (Reuters) – European carmakers face
production cuts and a squeeze on profits if difficulties persist
in sourcing car parts from Japan, with some analysts saying they
could lose up to 2.4 billion euros ($3.4 billion) of annual
profits.

Some companies in Europe have already started cutting
production as problems mount at Japanese parts makers, hit by
the effects of the devastating earthquake and tsunami, in turn
hampering carmakers and suppliers around the world.

European carmakers get electronic parts, semiconductors and
some mechanical parts such as gear boxes from Japan.

Some say it could be months, rather than weeks, before
production gets back on track in Japan, where lost production in
the two weeks since the quake tops a third of a million
vehicles. [ID:nL3E7EC03B]

Commerzbank said in a worst-case scenario of a complete
shut-down of Japanese production for a month — which it said
was not very likely — European carmakers could take a 2.4
billion euro ($3.4 billion) hit to pretax profit in 2011.

Italy’s Fiat (FIA.MI: Quote, Profile, Research) and France’s PSA Peugeot Citroen
(PEUP.PA: Quote, Profile, Research) would likely be worst hit because they are less
profitable than for instance their German peers.

Modern cars have as many as 30,000 parts supplied by many
different component makers. A single missing bolt can halt
assembly lines and set off a chain reaction in the industry’s
famed just-in-time manufacturing process.

Research firm IHS Automotive said a shortage of parts
stemming from the quake may cut global vehicle output by 30
percent within six weeks in a worst-case situation.
[ID:nN24186350]

PSA has started to cut production at some European sites
after Hitachi (6501.T: Quote, Profile, Research), which supplies it with air-flow meters
for diesel engines, was hurt by the quake. [ID:nLDE72N06E]

In a knock-on effect, German automotive cables and wires
maker Leoni (LEOGn.DE: Quote, Profile, Research) will lose 3 million euros a week from
Peugeot’s production cuts, WestLB analyst Henning Cosman said,
citing the company’s management.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Ships avoiding Tokyo port on radiation fears [ID:nLDE72N1DH] Japan disaster in figures http://r.reuters.com/ser58r Special Reports on Japan [ID:nL3E7EN0C6] Quake reveals flaw in global supply chain [ID:nLDE72M0TK] Analysis on Japan auto recovery [ID:nL3E7EC03B] Factbox on hit to auto, electronics makers [ID:nL3E7EM0B4] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

WORST CASE

Commerzbank analysts said in the worst case of total
production stoppage for one month, PSA would lose 65 percent of
2011 pretax profit — including lost profits and fixed costs for
the month — Renault (RENA.PA: Quote, Profile, Research) 44 percent and Fiat 81 percent.

Pretax profit at Germany’s Daimler (DAIGn.DE: Quote, Profile, Research), BMW (BMWG.DE: Quote, Profile, Research)
and Volkswagen (VOWG_p.DE: Quote, Profile, Research), Europe’s biggest carmaker, would
take a hit of between 22 and 30 percent, Commerzbank said.

HSBC analyst Horst Schneider said Volkswagen could be hit by
bottlenecks in the supply of transmission components and some
sensors it buys in Japan.

“Even if some components could be sourced from other
suppliers, we could imagine that this might lead to some extra
costs, which could drag down the EBIT (earnings before interest
and tax) margin at VW for one or two quarters,” he said.

Metzler Equities analyst Juergen Pieper said his worst-case
scenario envisaged a production stoppage of no more than two
weeks, equivalent to about 4 to 5 percent of annual sales, which
he said most carmakers could offset with labour adjustments.

“That is in a range that can be compensated with additional
shifts at a later point in time, with shortened working hours or
by sending workers on vacation.”

So far, German carmakers and automotive suppliers have said
they have enough parts to get by without fresh supplies, and
some have said they would not be impacted because they do not do
a lot of business with Japanese companies.

But they are already looking at cutting production,
according to Germany’s Federal Labour Office. [ID:nLDE72N198]

“According to our technology team, 21 percent of global
wafer capacity is still down and key chemicals could be in short
supply soon,” Commerzbank analysts said.
(Editing by David Holmes)
($1=.7062 Euro)

Japan woes set to hit Europe auto sector-analysts