04/17/2012 05:27 pm ET Updated Apr 17, 2012

PA-12 Resin Shortages From German Supplier Fire Could Disrupt Auto Industry

An explosion at a German auto supplier two weeks ago could prove to be disastrous for the global auto industry, as auto suppliers are now faced with shortages of a key chemical that could shut down car production in the United States, Europe and Asia.

About 200 representatives from auto suppliers and major automaker executives convened in Detroit on Tuesday to figure out how to replace PA-12, a nylon compound used in plastic fuel lines and brake lines; it is favored because it can withstand heat and can stand up to corrosive gasoline additives. The news of the potential shortage was first reported by Bloomberg.

"A significant portion of the global production capacity of PA-12 (nylon 12) has been compromised," declared a statement issued by the Automotive Industry Action Group after the summit. The chemical isn't easily replaced, the group said, noting, "These are highly engineered products produced via a very complex manufacturing process."

Industry players will work together to stretch current supplies of the chemical to make it last longer. They will also seek alternatives to PA-12 and test new solutions to make sure they can endure the same wear and tear.

Evonik is one of the leading producers of PA-12, which is used as a coating for plastic pipes, also used in solar panels, offshore pipelines, sporting goods and household goods.

About 40 percent of the global supply of PA-12 was cut off after an explosion at an auto supplier called Evonik Industries in the North Rhine-Westphalia region of Germany. The March 31 accident, which killed two company employees, took place in the part of the plant producing two chemicals that go into PA-12's manufacture.

Evonik told Reuters on Tuesday that it will take three months for its plant to resume normal production.

"The possibility for serious disruption is real," said Paul Blanchard, an analyst with IHS.

Auto manufacturing runs on what's called a "just-in-time" schedule, meaning parts arrive at the assembly plant often just hours before they are needed. This keeps plants clean and lean -- they don't have to store up massive amounts of inventory until those ingredients are needed -- but it also makes production susceptible to disruption when something goes awry.

And this incident exposes vulnerabilities in the world's most complex supply chain, whereby 3,000 individual parts go into each car or truck made. Each component contains hundreds of other pieces supplied by multiple other companies -- such as the rubberized portion of a windshield wiper, the hard metal parts of that wiper or the electronics used for a wiper to move.

All it takes is for one of those parts to be missing and an entire production line can be shut down.

The auto industry has faced massive parts shortages in the past. Just last year, the earthquake and tsunami that rocked Japan resulted in widespread destruction of scores of auto suppliers. A company that produced the base chemical for black and red paints was damaged and a maker of car computer components also suffered damage.

The industry scrambled to find new sources for those materials. By the end of last year, some shortages had resulted -- several dealers had waiting lists for cars like the Toyota Camry -- and many people had to choose car colors other than black or red. But for most consumers, the tsunami caused only minor disruptions.

This time, however, could be different.

"This could prove to me slightly more serious, depending on the industry response, because the material has worked its way into many fuel systems," Blanchard said. "It's not as simple as being able to pick a black car instead of a blue one. They are all going to have this material in their fuel systems."

For now, no automaker has canceled production as a result of a shortage of PA-12. But following the Japan tsunami last year, it took several weeks for the impact to surface in the United States.