Thursday, October 27, 2011

Toyota to cut N.America output on Thai floods

TOKYO: Toyota Motor Corp said on Thursday, Oct 27 it would cut production in North America for one day due to the interruption of parts supplies from Thailand, marking the first impact of the floods on car production outside Asia.

Thailand's worst floods in 50 years have affected hundreds of manufacturers and cut off the supply of about 100 components for Toyota, the country's top automaker. Toyota has three factories with a combined production capacity of 650,000 vehicles a year in the Southeast Asian export base.

The disaster also began affecting output outside the country this week. Toyota reduced work in Japan due to the shortage of electronic, plastic and forging parts, and cut back work in Indonesia, Vietnam and the Philippines.

Honda Motor Co has also postponed the launch in Japan of a special edition of its Life minivehicle that had been scheduled for Oct. 13. Its 240,000-cars-a-year factory in an industrial park in Thailand's Ayutthaya area is still under water.

With many suppliers directly hit by the deadly floods, automakers are scrambling to procure replacement parts and assess the extent of disruption to the supply chain.

Japanese automakers dominate the Southeast Asian car market, where they have recently announced a slew of new investments to meet booming demand.

Before the cancellation of work in North America, Tokai Tokyo Research analyst Mamoru Katoh had estimated a 5,000-vehicle daily output reduction for Toyota globally based on its announced plans. Assuming a 300,000 yen ($4,000) profit on each vehicle, that would amount to a 1.5 billion yen ($19.7 million) reduction in profit every day, he wrote in a report.

In North America, Toyota said it would suspend vehicle production on Oct. 29 in Indiana and Kentucky, two plants in Ontario, Canada, and an engine plant in West Virginia to conserve parts.

Toyota had scheduled Saturday production to catch up on output after it was forced to cut back due to supply chain disruptions in the wake of Japan's March earthquake and tsunami.

Japan's Chunichi newspaper on Thursday cited an unnamed Toyota executive as saying a complete normalisation of parts supply and production in Thailand could take until December or later. Toyota said the situation remained unclear.

About 1,800 Japanese manufacturers operate in Thailand, including Canon Inc , Pioneer and Sony Corp .

Honda, Japan's No.3 automaker, said its car, motorcycle and power product factories will remain closed at least until Oct. 31, in line with the Thai government's calling of a special five-day holiday to let people escape.

Toyota and Nissan Motor Co said they expect to provide an update for next week on Friday at the latest, after announcing a suspension through Oct. 28.

With many car components exported from Thailand, the disruption is poised to spread to more countries for Nissan and Honda as well as parts inventories run out.

In September, before the floods began shutting car factories, Toyota built about 70,700 vehicles in Thailand, Nissan about 20,000 and Honda about 22,000.

At midday, Toyota's shares were up 1.8 percent, Nissan's were up 3.3 percent and Honda's were up 1.5 percent, outperforming a 0.5 percent rise in the benchmark Nikkei average. - Reuters

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