chemical factory fire threatens Global car production

A fire in a chemical factory in Germany has put car manufacturers on red alert – because the chemical it produces is critical to braking systems. The factory is owned by a company called Evonik and it manufactures an obscure chemical called CDT, which in turns makes a resin called PA-12. Brake and fuel lines are made out of this resin, and something like one-third of the global supply has, literally, gone up in smoke.

The problem is that, as the material is safety-critical, car manufacturers cannot just ring up a local plastics maker and ask them to make a few batches of PA-12. Any new supplier would have to be tested and approved, which would take months. The Automotive Industry Action Group says that “a significant portion of the global production capacity” has been compromised.This is becoming a recurrent problem for the industry. In the wake of the Japanese earthquake, car makers discovered that something like half the chips that control electronic safety systems came out of one factory owned by Renesas in Japan. It was thought that the factory was going to be off-line for months and no-one knew where replacement chips were going to come from. In the event, Renesas worked around the clock and got the factory up and running much more quickly, and a crisis was averted.

Now many people in the industry are wondering if the relentless search for efficiency and low cost, which is driving consolidation in the component sector has gone too far. If one factory going off-line can threaten an entire global industry, maybe it is time to spend a bit more money to have security of supply.