Business
2:42 am
Mon April 23, 2012

German Chemical Plant Fire Threatens Auto Backlog

Originally published on Mon April 23, 2012 4:36 am

Transcript

RENEE MONTAGNE, HOST:

Next, we have a tale of globalization, how a single fire at a company in Germany could affect business in Detroit or Shanghai.

STEVE INSKEEP, HOST:

The company is a chemical plant in a town called Marl. An explosion there killed two people. It was a tragedy, but did not seem to have global significance.

MONTAGNE: Until car companies realized that Marl is vital to their business. NPR's Sonari Glinton explains.

SONARI GLINTON, BYLINE: Often, when we report on the car business, we say things like the American car business or the European car business or the Japanese auto industry. In truth, none of those distinctions really mean anything in the car business anymore, and you need look no further than Marl, Germany. In that town, there's a plant that makes a chemical. Jay Baron is with the Center for Automotive Research. He's going to help explain.

JAY BARON: This plant makes a chemical that is used in another material called Nylon-12, which is a material that is used - it's a very basic material. It's simply a coating that's used in some of the critical parts of the vehicle, like fuel lines and brake lines.

GLINTON: So, to get really simple: it's a chemical that goes into another material that goes into tubes that goes into your car. It's the kind of thing where it's so specialized that not a lot of companies make the product, but a lot of companies end up using it. The plant is one of very few - less than a handful - that make the chemical in the world.

BARON: In the past, we would have much more local content, localization, local suppliers and so on. But that's no longer cost-competitive. We've got to have these global supply chains, and this is just an evolution in the industry, and I think this is just sort of showing that we have an issue that has to really be addressed.

GLINTON: So the car companies at the end of the supply chain don't know if a plant, say, in Marl, Germany, could have an effect on them in Detroit or, say, Shanghai. The car companies and their major suppliers held a summit to figure out if they were affected and what to do about it. Chemical companies are rushing in to fill the gaps so production isn't disrupted.

FRANK BUSCEMI: The industry is global, and everything is interconnected.

GLINTON: Frank Buscemi is with TI Automotive. It makes fuel pumps, fuel tanks, heating and cooling lines. Buscemi says 70 percent of the cars on the road have a part made by TI Automotive. One of their suppliers: the plant in Marl, Germany.

BUSCEMI: You've got to have the ability to be able to produce, even in trying circumstances. And the industry has shrunk in the last couple of years to the point where you're very, very lean in your operations, but you still have to have the ability to, you know, provide parts anywhere at any time.

GLINTON: Buscemi the car industry is just learning how vulnerable it is to disruptions after the Japanese earthquake and tsunami. Now, here's the thing: most people in the industry say as the car companies push to become more global, the supply chain will get more interconnected, and therefore more fragile. And there are hundreds of small towns, like Marl, Germany, that could hold the fate of the auto industry in their hands. Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.