Volvo's inventories of Japan-supplied components critically low

Factory outages and decreased manufacturing capacity in Japan has been widely reported over the past week, but the news reports have mostly been speculative, questioning when and how supply chains would be compromised following Friday's earthquake and tsunami.

On Thursday, fears were realized when Volvo announced it has a limited supply of Japanese components left and its production could take a big hit in the coming weeks if an alternative source is not found. The Swedish carmaker said it only has about 1 week left of critical devices sourced from Japanese factories and is looking for alternative suppliers.

According to The Wall Street Journal, Volvo purchases about 10 percent of its automobile components from Japan, but many automakers have manufacturing facilities in the northeast part of the country, which was the hardest hit part of the island nation. "If we can't get a hold of these components, it will affect the production significantly," said Volvo Cars spokesman Per Ake Froberg. "Seven of our suppliers are located in the stricken areas of Japan and they have shut down production," he affirmed.

It is exceedingly difficult to form an entirely new supply chain in a short period of time and the halt in production could dig into Volvo's sales figures in 2011. In 2010, the company reported sales jumped 51 percent from the year prior.