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Critical Shortage Could Halt Auto Sales

German explosion cuts supply of component for engine parts


The first few months of 2012 have been very good for U.S. auto sales, with almost every car manufacturer posting sales gains.

However, an explosion late last month in Germany could threaten the outlook for the rest of the year by bringing automobile production to a stop.

The March 31 incident at an Evonik Industries resin plant killed two workers and put the factory out of commission, according to the Associated Press. The factory produces Cyclododecatriene (CDT), a key ingredient in the type nylon resin — known as PA-12 — used in brake and fuel lines for vehicles, among other manufacturing uses.

U.S. automakers held a meeting on Tuesday in Detroit to assess the situation.

Bloomberg noted that the damaged Evonik plant accounted for about half of worldwide production of CDT. With that plant unlikely to return to production any time soon, global CDT capacity is “very limited.”

The shortage of CDT hasn’t become an emergency just yet, but automakers are working to avoid potential problems.

General Motors (NYSE:GM) has formed a task force to examine potential alternatives to CDT. The company told the AP that some it its plants were already affected. Ford (NYSE:F) and Chrysler are evaluating the situation, but said they have not yet felt any impact from the CDT shortage.

Switching to an alternative to CDT is problematic since any replacement ingredient in the resin would require testing prior to deployment.

CDT supplies have been dwindling in recent years as solar panel makers acquired more of the chemical for use in their products.

Article printed from InvestorPlace Media,

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