Business / Auto China

Dupont, Dow to help global automakers avoid output crunch

(Agencies) Updated: 2012-04-20 14:17

Dupont, Dow to help global automakers avoid output crunch

United Auto Workers union member Carrie Attwood uses an ergonomic-arm to install a front seat in a Chevrolet Volt electric vehicle at General Motors Detroit-Hamtramck assembly plant in Hamtramck, Michigan July 27, 2011. [Photo/Agencies]

Dupont and Dow Chemical are among chemical firms working with global automakers who are bracing for a crunch in production, after a German chemical plant explosion cut a chunk of supply of a nylon resin used in brake and fuel systems.

The risk of production cuts is greater for car markers in the United States and France, and less in Japan and Germany, UBS said in a research note.

"We see high risk of production stoppages in the second quarter," UBS analysts said in the research note issued on Thursday. But they also saw an "equally high probability" that alternatives would be found within the same quarter.

The global supply of PA-12, used in several industries including auto manufacturing, was already stretched thin before the explosion at an Evonik Industries AG RAGES.UL plant in Marl, Germany on March 31, that led to the nylon resin shortage.

Auto experts and analysts are not clear how the shortfall would affect China, which has overtaken the United States as the world's largest auto market.

Florian Schattenmann, research director for Dow Automotive Systems, said Dow "has allocated essential resources to find alternative solutions" to the use of the nylon resin PA-12, also known as Nylon-12.

DuPont CEO Ellen Kullman, in an earnings conference call with reporters on Thursday, said the company has three polymers that could be a replacement in some automotive applications.

As the race is on to find alternative substances to the nylon resin and as automotive engineers seek "work-arounds" to keep making cars without PA-12, solutions likely will not be found in time to keep global auto production from falling in the second quarter, several analysts said.

Evonik is the leading maker of cyclododecatriene, or CDT, which is a base material used to make PA-12. The UBS research note said Evonik had 70 percent of the global available capacity of CDT used for the nylon resin PA-12.

Evonik made 40 percent of the world's supply of CDT, said UBS. The available supply figure is higher because some makers of CDT do not make it available to other companies to make the nylon resin PA-12, UBS said.

Two workers were killed in the March 31 blast. Evonik stopped all its production of CDT.

Evonik has said it will be at least three months and perhaps until the start of next winter before it can resume full production of CDT.

LMC Automotive said on Thursday that North American automotive production, "which has been in overdrive in recent months" faces a "real and substantial risk" of slowed output.

Automakers will be forced to more closely manage inventory and the types of vehicles they produce to cope with the "looming shortage," said Jeff Schuster of LMC Automotive.

Neither LMC or UBS, nor major automakers around the world contacted by Reuters this week, have said how deeply production may be cut in the coming months.

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