Which agencies are affected by the shutdown

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This content was published on March 30, 2011 - 1:00 p.m.

FRANKFURT (awp international) - According to the rating agency Moody's, European automotive suppliers will feel the effects of the natural disaster in Japan. Although the European suppliers are directly affected only slightly, writes the rating agency in a study published on Wednesday. European suppliers could, however, be drawn into the wake of lower car production by manufacturers in Europe and North America, who would have to shut down their production due to a lack of supplier parts. The rating agency expects a temporary negative impact on sales and earnings, especially in the second quarter of 2011.
Closing the supply chain will take some time, according to Moody's analyst Rainer Neidnig. Afterwards, however, the production backlog could be made up at least in part. Therefore, the agency does not see the credit rating of companies, which is important for loan agreements, at risk. In the case of European suppliers, Moody's estimates that Japan only accounts for a maximum of ten percent of sales.
Moody's, however, sees the Japanese automaker weakened by the natural disaster in Japan. At least between April and September, operations and profitability are likely to be adversely affected by the effects of the earthquake, tsunami and nuclear disaster.
While none of the manufacturers' plants were destroyed, the indirect effects of power rationing, lack of vendor parts and the situation of workers meant more serious problems, said analyst Tadashi Usui of the agency's Tokyo office. His colleague from New York, Michael Mulvaney, sees the Japanese automakers more affected than manufacturers of electrical appliances, for example, because the automotive industry has a broader supplier base and is heavily dependent on production in Japan. Finding alternative suppliers will drive costs up and could cut margins by one to two percent, Mulvaney said.
First and foremost, the financial strength of the Japanese automaker determines their vulnerability to the disaster, Usui said. Toyota and Yamaha are less well positioned in their current credit rating, while Nissan and Honda are better and Isuzu are in the middle. Toyota was only just beginning to recover from the wave of recalls last year. In contrast, Nissan was on the up and was under observation for a possible upgrade.
For the coming fiscal year, which begins in April and lasts until the end of March of the following year, Mulvaney expects Japanese carmakers to increase sales in the low single-digit percentage range at most. Foreign demand could cushion the weakness of the domestic Japanese market somewhat. Higher prices for electricity and supplier parts would reduce profits for the year as a whole. The financial strength of the companies will not decrease so much that a significant downgrade in the credit ratings can be expected, according to the forecast./dct/ep/chs

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