A few weeks ago we reported that vehicle manufacturers from all over the world were starting to struggle to keep their production lines open. Gladly this was not due to a new drop in demand but it was due to the earthquake in Japan. The quake had hit the regions where these manufacturers had huge plants that were churning our components to be sent around the globe.
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Despite the quake hitting a few weeks back we are now starting to see the global knock on brought by the effects of the quake. Over the past few weeks the stock of components has be run down and we are now down to what can be produced and sent just in time for production.
So its will come as no surprise that Toyota has cut production at one of its UK plants. The plant based in Burnaston has had its production scheduled slashed due to the lack of parts for the vehicles they produce. Initially they have reduced shifts to three half day cycles.
This is the current optimal level of production that will be able to service the supply of parts that can be sent to the UK. What is currently unsure is how long this cut in production will last as its not known when the Japanese plants will be up and running or an alternative can be found to produce significant volumes of parts.
Worldwide Toyota has cut its production capacity by 70% which highlights how reliant they were on the Japanese production. This is surprising as the manufacturer has plants all over the world, it will be interesting to see if they decide to re house some of these production plants to areas of the world that are a lower threat of natural disaster.
It would make sense to spread essential production across the globe to spread the risk of production breaks. Whilst the costs of running a plant are much lower the further east you go the risk of natural disaster also increases. So we would not be surprised if the top bods are currently costing the loss of production against the higher fixed costs of producing parts in a lower risk country.
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The loss and reduction in production is expected to leave Toyota with a hole in its production of around 500,000 new vehicles. This is a huge hole not only for the company but for the global economy to fill. It is also unsure what market commentators think the global consumer will do to fill their demand for new vehicles.
Toyota is by no means on its own in this problem, many manufacturers have major plants based in Japan so in a short period we may see forecourts emptying out. In normal economic terms the drop in supply would increase the price if the demand stays the same. So if you looking for a new vehicle now might be the time to buy or you may wish to hold on for a longer period.
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