- Updated April 17, 2012, 8:36 p.m. ET
Nylon-12 Haunts Car Makers
Explosion at Big Supplier of Resin for Automotive Parts Has Industry Fearing Potential Shortages
By JEFF BENNETT And JAN HROMADKO
Production shortfalls at a single German auto-parts supplier are beginning to ricochet through the global auto business.
More than 200 auto executives met in a Detroit suburb on Tuesday to evaluate a looming shortage of a relatively obscure resin essential to modern auto production.
Inventories of the resin are being depleted after an explosion last month at an Evonik Industries AG plant in Marl, Germany, that killed two employees. Evonik describes itself as the only integrated maker of the resin, which is used to make fuel and brake lines.
Agence France-Presse/Getty Images
Firefighters poured water on an Evonik plant in Germany on March 31.
“We are doing our utmost to resume production before the winter this year and expect that the works to fully repair the plant will take at least three months,” an Evonik spokeswoman said. Several Evonik executives attended the meeting on Tuesday.
Evonik makes 25% of the global supply of the specialty resin known as nylon-12 and supplies a chemical building block to another company that makes a similar amount. The resin is a precise blend of chemicals that can resist reacting with gasoline and brake fluids.
Last year, production in Japan of Merck KGaA’s Xirallic, the shiny pigment in some automotive paints, was disrupted by the March 2011 tsunami and subsequent nuclear power plant problems in Onahama, Japan.
Auto makers had to limit or stop taking orders for some cars that used the pigment for certain colors because the plant was the industry’s primary supplier of the pigment.
The Merck plant was repaired, but disruption rippled through the industry for more than six months.
Jay Phillion, an executive with parts maker TI Automotive Ltd., said that the auto industry would search for alternatives. “This thing is being pushed quickly for the sake of saving production,” he said. The company has already warned customers that production disruptions are highly possible should there be no quick solutions.
During Tuesday’s meeting, the 200 executives were divided into separate teams. Each was assigned a task, such as finding a replacement material or identifying new firms to produce it.
IHS Chemicals analyst Paul Blanchard said there are alternative materials available but they must be tested and produced on a greater scale.
“I would be surprised if there is more than a month’s worth of inventory out there. We are 19 days into this and the scope still has yet to be defined.”
On April 10, Arkema SA, another manufacturer of the resin, said shortages of Evonik’s building block meant it also wouldn’t be able to supply its customers with the resin, Mr. Blanchard said. “The ability of Evonik and Arkema to find alternate sources of CDT [a resin building block] is very limited and it is doubtful that the CDT shortage can be made up. In the short term auto and truck production will be affected,” he said.
General Motors Co. GM +2.58%said on Tuesday it has a global team from its purchasing, engineering and supply departments working to allocate resin and prioritize its needs. Ford Motor Co., F +0.25%Chrysler Group LLC and Toyota Motor Corp. TM +0.25%each said they are monitoring the situation, but have not had any reports of production disruptions.
Plastic parts made of the resin are key components in automobile production, in the photovoltaic industry, and in offshore pipelines. Other uses include sporting-goods and household-goods industries.