Monday, October 10, 2011

Thailand assesses damage as floods hit car supply chain

BANGKOK: Thailand's worst flooding in five decades could disrupt the operations of automobile and parts makers that use the Southeast Asian country as a production base, industry analysts said on Monday.

About 270 people have died since late July in the floods, mainly in the centre, north and northeast, the Department of Disaster Prevention and Mitigation said.

Nearly 200 factories, including one run by Japanese car maker Honda Motor Co Ltd , have had to close in the central province of Ayutthaya after an industrial estate run by Rojana Industrial Park Pcl was flooded.

Pitak Pruittisarikorn, executive vice president of Honda Automobile (Thailand) Co Ltd, told reporters it was too early to estimate the total cost of damage but said hundreds of cars waiting for delivery to clients had been submerged in water.

"We have the insurance to cover the plant and all the machines. We're urging the government to help drain water out as soon as possible," Pitak said after a meeting with the Industry Ministry.

Last week, Honda moved about 3,000 assembled cars from the estate to other areas.

"It (flooding) will affect all original equipment manufacturers (OEMs) as suppliers in Ayutthaya and in Pathum Thani (Navanakorn) supply all major suppliers," said Hajime Yamamoto, Thailand director for Colorado-based research firm IHS Automotive.

"Honda will be hit hardest due to its location but others will nonetheless feel the disruption."

Thailand is a major centre for car production for most of the world's biggest manufacturers, but their assembly plants are mostly in eastern Rayong province, which has not been badly affected by flooding.

However, Honda, Japan's third-largest car maker, has two plants located at the Rojana Industrial Park and can produce 240,000 vehicles a year there. It halted production and evacuated workers from the Ayutthaya plants last Thursday.

"Since suppliers may have one week of stock, the other OEMs will face production halts from one week later, but we need to wait until the last moment to confirm which OEMs will halt production," Yamamoto said.

Rojana Industrial Park, 70 km (45 miles) from downtown Bangkok, covers 1,164 hectares (2,875 acres). Canon Inc , Nikon Corp , Hitachi Metals Ltd and Siam Cement are among companies with operations on the estate, according to Rojana's website.

An industry source said there were 20 car part plants on the Rojana and Saharat Nakorn industrial estates affected by the floods. That accounted for 10 percent of the total parts production of the country.

The Saharat Nakorn estate has 43 manufacturing plants with almost 15,000 workers, with Japanese manufacturing facilities making up the largest proportion of investment at 70 percent.

Ammar Master, a senior market analyst at the Asian unit of J.D. Power and Associates, a California-based industry research firm, said: "There will certainly be some impact on production due to the flooding in Ayutthaya."

"While automakers will have a stock of components, we expect a slowdown in production in the immediate term," he said.

"Measures taken are likely to be similar to those implemented in the immediate aftermath of the (March earthquake) disaster in Japan." ' Reuters


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