Auto Industry Faces Crisis Through No Fault of Its Own

Businesses think going to a single supplier is going to save them money. What they miss is the possibility of a crisis that will cost more than they'll save. A case in point: the auto industry.

"The potential shortage of a key component used to make fuel lines and brake lines could force automakers in the U.S. and around the world to close car and truck plants as they run short of parts.... A March 31 explosion at Evonik Industries in western Germany killed two workers and damaged a factory that makes CDT. The chemical is a key component in a nylon resin called PA12, which is used to make a specialized plastic used in auto fuel lines and brake lines. It is also a component in solar cells, pipelines, sporting goods and household items." (http://www.courier-journal.com/article/20120416/BUSINESS/304160081/1003/rsslink)

Now there's a crisis at hand. Just when auto makers are exiting from the recession, their reliance on a single raw material manufacturer could create a crisis. The Institute for Crisis Management defines a crisis as any problem or disruption that triggers negative stakeholder reactions that could impact the organization’s business and financial strength.

For a broader view of supply chain disruptions, see Larry Smith's April 5 blog on "Hold your partners accountable." (http://www.crisisconsultants.blogspot.com/) Larry is with the Institute for Crisis Management.

Certainly the lack of CDT constitutes a crisis for auto makers. Do you think no crisis will happen on your watch? Think again. Crises befall every organizations, no matter how well it might be run. That's why a crisis plan is so important.