The Thai flooding could impact the launch of new Toyota vehicles like the next-gen Lexus GS.
Both Toyota and Honda acknowledge they will have to make further cuts in production in the wake of the disastrous flooding that has savaged Thailand. The two makers source a number of key components – especially microprocessors and other electronic goods – from the Southeast Asian nation, which has been hammered by some of the worst flooding in decades.
Toyota announced today it will reduce production at its Japanese plants by 30% this month due to parts shortages, with additional cuts being made in the U.S. and other plants around the world.
The cuts come at a particularly bad time for both Toyota and Honda. The two makers collectively lost more than a million units of production due to the earthquake and tsunami that struck Japan on March 11 leading to an earlier shortage of critical parts and components.
They had been hoping to make up some of that lost production before the end of the year but that now seems unlikely. It does seem likely, however, that the latest setback will result in not only further vehicle shortages but a significant impact on corporate earnings. Honda last week reported a 68% plunge in earnings for the July – September period and Toyota is also expected to report a short dip.
The two makers had been hoping that the impact of the Thai disaster – which has damaged some of their own factories and also flooded out many automotive suppliers – could be quickly contained. But the reality is that the situation could stretch on for a number of weeks as suppliers try to dry out or find alternative sources.
For Honda the situation could be compounded by a delay in the launch of the fourth-generation CR-V crossover. The previous model has been in short supply since March and has slipped to second on the U.S. compact crossover sales charts behind the Ford Escape. Honda had planned to unveil the new 2012 CR-V at this month’s L.A. Auto Show and start shipping it to dealer showrooms soon afterwards.
The maker had been on an aggressive drive to rebuild U.S. dealer inventories – which were down to around 50,000 at the end of October, according to John Mendel, Honda’s top American executive, compared to 170,000 a year earlier. But industry watchers say that is unlikely to happen now until sometime after the New Year.
Honda’s Thai assembly plant, a key source for much of Asia, may not be back up and running before December, according to the Federation of Thai Industries.
Toyota is also getting ready to roll out some new models, such as the Lexus GS sedan, that could be impacted by the parts shortages, though so far, the industry giant has not announced any launch delays.
Toyota had also been scheduling overtime and even adding additional shifts at factories in the U.S. and abroad hoping to rebuild vehicle stocks. That also will be difficult to achieve, now, according to analysts, before 2012.
While Toyota and Honda appear to be at the greatest risk, the flooding has also hurt a number of other makers, including Ford, which now hopes to resume production at its plant in suburban Bangkok on November 14th. That factory, which serves as a joint venture with Mazda, produces a number of vehicles, including the newly redesigned Ranger compact pickup that is sold in many world markets – though not in the U.S.
Car production will resume first at the Auto Alliance plant, with Ford expecting to announce plans to resume Ranger production on the 17th.