Montgomery County State's Attorney John McCarthy discusses his efforts to address gang violence. Plus, D.C. Councilmember Trayon White joins us to recap the "grocery march" protesting food deserts east of the Anacostia River.
Companies around the world rely on supplies from Japan. Four months after the devastating earthquake, we find out which parts of the supply chain turned out to be resilient, and which are still having difficulty recovering.
- Michael Robinet Director of Global Vehicle Production Forecasting, IHS Automotive
- Jim Handy Analyst, Objective Analysis
MR. KOJO NNAMDIFrom WAMU 885 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, how the war on drugs affects people in pain in developing countries. But first, days after a 9.0 earthquake rocked Japan, the industrial world wondered if its powerhouse supplier would ever recover. "Japan Quake Stirs Unease About Global Supply Chain," read one Associated Press headline in March. "Japan Supply Chain Fears Rattle World Stock Markets" blurbed the BBC.
MR. KOJO NNAMDIFour months later, the business headlines are brighter. "Japan Bids To Turn Tragedy Into a Triumph," read a Financial Times headline in June. "Tech Supply Chain To Fully Recover From Japan Disaster By Fall," said CNN recently. Turns out, not only are the Japanese people remarkable resilient, the made in Japan label seems to be as well. Japan has revived or compensated for most of what its factories lost in the disaster, but there are still some kinks in the chain.
MR. KOJO NNAMDIJoining us by telephone from California's Silicon Valley is Jim Handy. He's a semiconductor and analyst with Objective Analysis, which is a research and consulting firm. Jim Handy, thank you for joining us.
MR. JIM HANDYOh, hi, Kojo. Thanks for having me on.
NNAMDIAnd joining us by phone from Michigan is Michael Robinet. He is director of Global Vehicle Forecasting for IHS Automotive, which is also a research and consulting firm. Michael Robinet, thank you for joining us.
MR. MICHAEL ROBINETGood afternoon.
NNAMDIMichael, I'll start with you. Can you give us an idea of what kind of assessment and damage control went on right after the earthquake? Let's start with the auto industry.
ROBINETWell, certainly and that's the center of my universe. Well, with respect to the automotive industry, there is a good amount of automotive manufacturing, both at the final vehicle level, but also the components that go into the vehicle that emanate out of the quake zone and then subsequently the subset of the radiation zone, with the Fukushima reactor. It had a profound effect on not only the Japanese automotive industry, but certainly downstream the global automotive industry.
NNAMDIJim, can you talk a little bit about the industry that you look at, which is the high-tech industry electronics?
HANDYSure. Actually, I'm even more narrow than that. I look at semiconductors chips...
HANDY...that go inside the electronics. And Japan is a major producer of semiconductors, but fortunately, an awful lot of the manufacturing or production capacity for these chips is down in southern part of Japan and the Sendai earthquake was very far in the northern side of the island of Honshu. And so there was probably less difficulty than Michael saw happening in the car thing, but similar to automobiles, the semiconductor industry did have concerns about the supply chain that led up to it.
HANDYSo, you know, like Michael said, it wasn't just the products, but it was also some of those sources of supply for some of the things used inside.
NNAMDIAnd the semiconductor materials are the foundation of modern electronics. They include everything from for radios, computers, telephones and many other devices. Jim, for a little more prospective, can you back up for a minute and describe how the field of buying and shipping supplies has transformed globally in the last, oh, two decades or so?
HANDYOh, yeah, there's actually -- it's interesting that Japanese manufacturers have had a very pronounced impact on manufacturing by implementing something that's called Just-In-Time Ordering, where rather than carrying large inventories, manufacturers will carry the smallest inventories that they can and then keep communications very high between themselves and their suppliers so that the suppliers are told exactly when a part is needed and that part is not ordered or carried as inventory until then. I believe that this was actually something that started at Toyota, but Michael could tell you more about that.
NNAMDI800-433-8850 is the number to call. Michael?
ROBINETYeah, it certainly -- well, the Japanese supply chain, as we call it, or the grouping of suppliers that work with a vehicle manufacturer, they call it a keiretsu in Japan, is still alive and intact. And certainly Toyota, Honda, Suzuki, even, to an extent, Mazda, have their own keiretsu. Sometimes those suppliers work with two or three vehicle manufacturers, sometimes they just work with one.
ROBINETSo what was interesting was that when the tsunami -- the earthquake and then subsequent tsunami came through, some vehicle manufacturers were more affected than others. This wasn't sort of a blanket, everybody was affected in the same way. For instance, Honda has two of its major vehicle assembly plants what I would call right on the edge of the quake zone, of the zone that was really affected by the earthquake and then the subsequent tsunami.
ROBINETNow, some people would say, well, they missed it, but they really didn't because what happened was there were a number of suppliers inside the quake zone that couldn't supply Honda on a just-in-time basis. A good example of that might be the seats that you sit on in your vehicle. They are not shipped thousands of miles and find their way to the final vehicle assembly plant. They are usually shipped within two to three hours away of the vehicle assembly plant to cut down on logistics cost and inventory and a number of other issues.
ROBINETSo to make a long story short, when the tsunami came through, there were a number of vehicle manufacturers that were more affected because they had more key suppliers in that quake zone than others did.
HANDYI just want to chime in here, though, and also point out that you might talk about a quake zone and kind of draw a circle around it, but you think about the extraordinary power of this earthquake. It was a 9.0. It was 100 times as large as the earthquake that struck San Francisco back in 1989 and, you know, that's like the largest one in the states in a long time. And, you know, that felt like a 6.0 or stronger even 500 or 1,000 miles away.
NNAMDIWe're talking with Jim Handy. He's a semiconductor analyst with Objective and Analysis, which is a research and consulting firm. And Michael Robinet, he is director of Global Vehicle Forecasting for IHS Automotive, also a research and consulting firm, about the effect of the earthquake and tsunami in Japan on the supply chain for all of the vehicles and all of the products that are -- that we depend on in this country and, of course, in other countries to have all of our gadgets work.
NNAMDI800-433-8850 is the number to call if you'd like to join the conversation. Are you waiting or did you have to wait on a part or product from Japan? You can call us to share your story. Do you think U.S. companies rely too heavily on overseas suppliers? 800-433-8850.
NNAMDIMichael, starting with you and then Jim, I'd like to talk a little bit about the kind of all for one, one for all attitude that was so prevalent in Japan after this disaster. The Japanese really pitched in to get their factories up and running quickly. Today -- even today, during the hot Japanese summer, it's my understanding that the Japanese government is asking citizens to keep their air conditioning a few degrees higher to keep electricity usage down. Would we do that if we had a major emergency? Starting with you, Michael Robinet.
ROBINETWell, one would wonder. Having just been in Japan a couple of weeks ago, I can tell you that they're keeping it more than a couple of degrees. In fact, just spoke to a colleague of mine. They're keeping it probably over 80 Fahrenheit. Now, I don't know about you, but over 80 Fahrenheit can make it a little bit difficult to work, so certainly they've relaxed their dress code policies in many of the Japanese office buildings and the like to enable that.
ROBINETWhat they're really doing is they don't have as much power, not only because the nuclear plants were down, but also some of the coal-fired and gas-fired plants were also affected. So therefore, to meet that peak demand that is really going on right now -- I'm not sure if anybody's been in Japan in the summer, but it is very, very hot and sticky. It'd be very similar to, you know, much of the southwest United States in terms of the type of weather. Therefore...
NNAMDIAnd during the course of the next few days, right here, Michael Robinet, we're expecting a major heat wave...
ROBINETOh, yeah, definitely.
NNAMDI...with temperatures over 100. And some of our weather forecasters have been asking people in this area to have their thermostats at 78 degrees during the hottest period so as to save energy and I'm just wondering how many people are willing to do that, 78 degrees. You say people in Japan were putting theirs up to 80 degrees in order to cooperate. Let me ask our listeners, are you putting your thermostat up to 78 degrees in this heat wave? Would you do that? 800-433-8850.
NNAMDIMichael, I interrupted you. Go ahead, please.
ROBINETNo. But certainly the Japanese are a very, very industrious people and certainly willing to go the extra mile to really get to where they need to go. For instance, one would walk through Tokyo Station, literally the largest train station I've ever been in, and there are, you know, literally hundreds of escalators, but one out of every two escalator would be shut down so people would take the down stairs instead of taking a down escalator. That saves electricity.
ROBINETEvery other light would be turned off. That saves electricity. So they're -- they are willing to do what they need to do to make sure that they can get the infrastructure back up and running and that's really the manufacturing infrastructure, to keep that really up and running.
HANDYYeah, I -- you know, I agree that that is like that and I have to say about the weather, I've lived in Japan, I've been to Washington, D.C. during the summer and I would say that both are pretty close to each other. They're both sticky and when the temperature gets up to 80, it feels horrible so .
NNAMDIYeah, and we're going to hit 100 during the course of the next day or two, but go ahead.
HANDYYeah, so anyway, you know, that said, something that is happening in Japan is, I think, the same kind of a phenomenon that we haven't really seen countrywide in the United States since World War II, which is the sense of a national urgency, that something needs everybody's help to happen. And although I didn't live through World War II, there's an awful lot of legacy about, you know, what happened during those times that people pulled together, people were willing to suffer without gasoline or tires for their cars.
HANDYThey waited in line for basic food. Ladies went without nylon stockings and, you know, that sort of stuff and that was all for the war effort. In Japan, we see an awful lot of that same communal feeling, that they're doing it for the good of Japan and that there's been a national emergency and everybody's rolling up their sleeves to help out.
NNAMDIWell, here, of course, we do pitch in to help one another. There's another issue and that is whether people would pitch in to help a U.S. company get back on its feet after a disaster, a private corporation. 800-433-8850. Would you pitch in to help a U.S. company get back on its feet after a disaster? 800-433-8850.
NNAMDIOne of the world's biggest suppliers of microcontrollers for cars is a Japanese company called Renesas. What happened to Renesas, Michael, and how is it doing now?
ROBINETDoing much better. I think what's interesting is initially after the disaster, there was a lot of talk that, you know, why on earth would the vehicle manufacturers source so many components out of one -- out of one location on Japan? And I can tell you that they don't necessarily do it consciously, but it's a matter of economy's scale.
ROBINETThe Japanese -- and I'm sure Jim could probably chime in on this as well, the Japanese are very, very, very good at doing this. They are very good at making microcontrollers. They literally are the best in the world. Even if you consider some of their wages, most of these facilities are more capital intense and then not so much labor intensive.
ROBINETSo it is still economically feasible to still build a lot of these types of microcontrollers that -- literally, your average vehicle could have anywhere between 50 to 100 of these embedded in different parts of the vehicle and the fact that this company was very, very good at building them. So it wasn't so much that they had a corner of the market, they did very, very well and they were able to really supply the rest of the vehicle industry with those components.
NNAMDIAnd Jim, how have they been able to do that in the wake of the hurricane -- the earthquake and tsunami?
HANDYWell, you know, that's something that they have done very well simply by everybody pitching in and working together. Renesas actually is -- the reason why it dominates the microcontroller market is because it's a bunch of other companies' semiconductor businesses that decided that they weren't doing as well as they wanted to once -- you know, because as Michael said, they're economies of scale and so Mitsubishi, Hitachi and NEC all ended up passing their semiconductor manufacturing plants over to a new company, which was Renesas, about 10 years ago.
HANDYRenesas has run those together and has become a very strong competitor in that field. Now, you know, with regards to questions about helping out a local private company, this is a manufacturer who employs a very large number of Japanese people. Even though it's capital intensive industry, as Michael says, there's still a lot of workers who work for this company who would be out on the streets if the Japanese left this gaping opportunity for some other country to go and satisfy.
HANDYSo, you know, there's a sense of national pride in actually having the Japanese manufacturer stay intact and not have a foreign entity take over the business because of this calamity that happened in Japan.
NNAMDIGot to take a short break. When we come back, we will continue this conversation on supply chain recovery from Japan's earthquake. You can shoot us an e-mail to firstname.lastname@example.org, send us a tweet at kojoshow or go to our website, kojoshow.org, join the conversation there. I'm Kojo Nnamdi.
NNAMDILater in the broadcast, how the war on drugs affects people in pain in developing countries. Right now, we're talking about supply chain recovery from Japan's earthquake with Jim Handy, semiconductor analysis with Objective Analysis, which is a research and consulting firm. And Michael Robinet, director of global vehicle forecasting for IHS Automotive, also a research and consulting firm. Jim Handy, how difficult was it for the PC industry to switch suppliers? Better yet, could you tell us how many Japanese components go into your typical iPad or phone?
HANDYI think -- I've probably never looked at it that way. Japan accounts for about 25 percent of the total semiconductor ship. And so it would probably be in proportion to that. But, you know, that doesn't say that these are necessarily chips made in Japan because even some American companies make their chips in Japan. And Japanese companies make chips in Taiwan and China. So it's a little bit blurry as to where the lines are drawn about that.
NNAMDIJim, there was some concern following the quake that Apple's lithium ion batteries for iPods would be in short supply for some time. Has Apple fully recovered its supplies?
HANDYYes. You've got to keep in mind that Apple is like the 800-pound gorilla that gets whatever he wants. Apple is such a phenomenal consumer of batteries, semiconductors, LCD screens, all of the components of all of the devices that they make that's -- if anybody is going to short shipments to a company, it will probably be to some smaller consumer of theirs than Apple's. And we haven't really heard complaints from these smaller companies either. It seems like the Japanese manufacturers did a very good job of doubling down and doing whatever it took to make sure that supplies were available for their customers.
NNAMDIWhat would've happened to the electronics supply chain, Jim, if this disaster had happened in Guangdong province in China?
HANDYWell, the jobs in Guangdong province are ones that can be moved to other places. And so these are labor intensive jobs. They're ones that don't require an awful lot of training and there are competing manufacturers in other provinces and also in other countries like Malaysia. So if something like that had happened, you would see manufacturing shift and some of the costs would probably go up, although they're a relatively small element of the overall costs of the manufactured goods.
HANDYAnd so if there were a cost increase and if it were passed onto the user, it probably would not be all of that noticeable to the user.
NNAMDIMichael, Japan is the third largest economy in the world. And most of us have a handful of electronics or a Japanese car in our households. But how important is Japan overall in the global manufacturing supply chain?
ROBINETWell, when you look at automotive they produce, they still produce about 13 percent of the world's vehicles. At one time, it was a much higher number, but certainly the Japanese vehicle manufacturers have co-located plants to other parts of the world. So, you know, certainly people in Kentucky and Tennessee and Alabama will tell you that there are Japanese facilities outside their doors and the Japanese have attacked, sort of, the currency problem by doing that.
ROBINETI think what's interesting, just to give your listeners an idea or the scale of really what occurred -- for instance, the tsunami occurred on March 11th. On March 12th, you know, companies like Honda and Fuji Heavy, which is Subaru and Toyota and all the other vehicle manufacturers, ventured into the quake zone as best they could and tried to communicate with their suppliers. First, they couldn't communicate with them.
ROBINETSecond of all, they would find -- they would get to the site of the supplier and they'd find a foundation surrounded by mud. The foundation would -- obviously, the building would be gone. The machines would sometimes be there, sometimes not be there. And all of the infrastructure that made that supplier work, water, waste water, hydro, certainly gas, communications and the people as well as their rhodium infrastructure were all severely impaired and or washed away. So just gives you an idea of the scale of what these manufacturers, as well as other industries, had to face.
NNAMDIJim, how is this...
HANDYYeah, Kojo, I just want to chime in...
NNAMDIPlease go ahead.
HANDY...something interesting about Japan is that because of the fact that it's such a wealthy country, it's far more prepared for this. The buildings are required to be built to withstand earthquakes of a certain magnitude. I believe that it's an eight pointer, which is, you know, a pretty phenomenal earthquake, but, you know, nothing like what they had. It was a tenth as much as the nine pointer that they had. But also the citizens do understand what to do.
HANDYThey have earthquake drills from time to time. And they also have an earthquake early warning system that tips them off when an earthquake has happened somewhere nearby, that it's going to be felt in a few minutes. And you compare this with -- the nine point earthquake to what happened with Haiti, with their seven point earthquake, and you compare the wealth of Haiti to the wealth of Japan. And, you know, Haiti had probably around 50,000 people lost in the seven point earthquake.
HANDYJapan had 100 times as strong of an earthquake with their nine point earthquake and only lost a third as many people. And that's because of the fact that, as a wealthy country, they can afford to put up buildings that are more earthquake safe than in Haiti. Haiti is still reeling after their earthquake. Meanwhile, Japan is doing a very good job of rebuilding. And so that wealth of Japan has really helped out the country an awful lot.
NNAMDIOnto the telephones, here's Richard in Silver Spring, Md. Richard, you're on the air. Go ahead, please.
RICHARDYes, Kojo and your guests. I just wondered, do the parts coming from the Japanese car manufacturers and chips for components -- are they radioactive? Do they absorb radiation that has recently occurred there?
ROBINETYeah, I could tell you that there was very little to no concern of that. Certainly a lot of the parts are -- were not manufactured near the radiation zone. Most of them were outside the radiation zone when those suppliers were brought back up to speed. And usually they're very small parts. The Japanese vehicles that are made in the United States or Canada or Mexico, they will use very, very small, what we call subcomponents, very small components that, much to the economies of scale argument that we're talking about earlier, really make sense to be made in Japan or at least at one manufacturer.
ROBINETSo those are the types of components that sometimes find their way into Japanese vehicles here that are produced here and obviously was the reason the vehicle manufacturers here had to stop as well. They just couldn't get their components from Japan to make those vehicles.
NNAMDIRichard, thank you very much for your call. We mentioned earlier if people would pitch in to help a U.S. company get back on its feet after a disaster. We also talked about how people would set their thermostats if advised to do so. So let's start with Elizabeth in Washington, D.C. Elizabeth, you're on the air. Go ahead, please.
ELIZABETHHi, it seems that it's not a fair comparison if you look at the West in Japan. Because I don't believe the same pay disparity between the CEO and workers exists in Japan as what we see here. And there also seems to be a greater tie to the performance of the company to the actions of the CEO in Japan then in here -- then in the West. So it doesn't seem like an outright comparison. And I heard in the Toyota plant, for an example, a worker could stop the line if they needed to for their own safety. GM would never allow that.
ROBINETWell, I would -- yeah, I'm sorry. I differ. There are abilities for vehicle manufacturers of all types, Korean, American, European, you name it. If you're a worker on that assembly line and there's a problem, you can stop the line. It's -- that's kind of an old wives' tale, unfortunately.
NNAMDIAnd the reason that you feel most people pitched in to help in Japan was that, in your view, because they were concerned about the company, the CEO or because they were identifying more with the workers who they felt needed to get back to work, Michael?
ROBINETOh, yeah. No, I think what's -- you know, that's an interesting comparison. I think something that Jim said earlier really resonates here. If you're in a small town and it -- whether it's a Japanese, American or whatever type of company, that small town will rely heavily on that vehicle manufacturer or the component manufacture for their livelihood. So whether the CEO is paid 10 times more than the average worker or a 100 times more, if the facility's not working, those people are not gaining income, which obviously has a crescendo effect on the stores in town and the town itself and the tax base.
ROBINETSo I think -- and you know, you could drive those types of comparisons, but in the end, if the plant's not working, it's not working. And everybody who is associated with it is also on the street as well.
NNAMDIOkay. Thank you very much for your call. Here's Denise in Fairfax, Va. What -- where's your thermostat, Denise?
DENISEWell, you asked if we would be willing -- if the people in the United States would be willing to set their thermostats lower. And I just wanted to say, I'm one of those persons who sets my thermostat low now. That's not just because of the money that we're saving, the energy, but caring for creation. And I think that there are a number of folks in the United States whose faith impacts their lives, whether they be Christian or Muslim or whatever. If they are part of -- and nearly everyone of those faiths, the care of creation, that it is a sacred worth, makes it important for us to do that.
DENISEAnd so, yes, my thermostat is set at 78. We raise the windows at night and then around 9:00 in the morning we close them and the house remains pretty cool. So I think it's a shame that we have to have it based a crisis or a situation with economic...
NNAMDIDenise, thank you very much for your call. We got a slew of e-mail on this issue. One from Oso (sp?) of Fairfax, now living in Austin, Texas, who says, "Here in Austin, where it's been over a 100 for more than 30 days, 80 degrees feels cool. I suggest people step outside occasionally and you'll readily accept 80 degrees as cool. It's really just a slight adjustment." That's all the time we have in this segment. Jim Handy, thank you for joining us.
HANDYOh, thank you, Kojo.
NNAMDIJim Handy is a semiconductor analyst with objective analysis, which is a research and consulting firm, as is IHS Automotive where Michael Robinet is director of global vehicle forecasting. Michael Robinet, thank you for joining us.
ROBINETHave a great afternoon.
NNAMDIYou, too. We're going to take a short break. When we come back, we'll look at the how the war on drugs is affecting people in pain in developing countries, I'm Kojo Nnamdi.
Most Recent Shows
Kojo chats with two reporters who spent the past year following the launch of Ron Brown College Preparatory High School, D.C.'s new school for boys of color. Their stories are now featured in "Raising Kings," a collaboration between NPR and Education Week.
For the first time since 2009, more people are leaving the Washington region than arriving ––including millennials. Kojo sits down with researchers to understand why migration to D.C. has slowed, and how millennials factor into the makeup of the city.
Many gardeners think that cooler weather means an end to gardening, but our roundtable of urban farmers offers tips for maintaining your garden throughout the fall months and preparing it for spring.