Fall-out from Thailand’s devasting floods is starting to have a knock-on effect across not just the immediate country, but overseas too as vehicle manufacturers and suppliers feel the pinch.
Around 300,000 people are employed in 3,000 auto supply companies a Thai Industry Ministry spokeswoman told just-auto this week, with the component sector only second behind electronics as a staple of the country’s economy.
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The rising waters show no signs of abating either with army and navy personnel dragooned in to fight the elements – some even being drafted to auto manufacturers’ factories to build levees in a bid to hold back the tide.
One supplier – Fortune Parts Industry (FPI) – that manufactures body parts as well as plastics and chrome plating mainly for export around the world – is located in the Lamlukka district near Bangkok and says up to 60% of its staff are unable to travel to work because of the rising floods and petrol shortages.
Those petrol shortages – combined with the more urgent lack – and price hike – of essentials such as food and water – mean that even if FPI were to get its factory lines rolling lorries cannot access the plant because petrol is becoming scarcer.
FPI normally deliveries 70-80 containers a month to the port for export, but is currently at a standstill as its staff turn their attention – and as countless other suppliers do the same – to literally shoring up their businesses against some of the worst flooding for decades.
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By GlobalDataFPI export sales officer Kenny Lam has been good enough to come to the phone several times this week – in what is a race against the rising water – and says some staff are having to stay at the factory because their own homes are flooded.
This natural occurrence has been somewhat of a slow-burner – it became apparent far more rapidly with the Japanese earthquake that something huge had rocked the country – but floods, seem somehow slightly more benign.
The effects however, are devastating with a knock-on effect already being felt across the region and beyond as electronics, hard drives and car parts, to name but a few sectors, start to feel a slow-down in the supply chain.
But the Thai government is taking this very seriously with some major cash behind its words. It says it will allocate TBH250bn (US$8.2bn) to industries damaged by the flooding with soft loans and other forms of assistance.
The Ministry of Finance will allocate TBH250bn to assist and rehabilitate entrepreneurs and industrial estate developers. Out of this amount, TBH20bn in credit will be extended to small and medium-sized enterprise (SME) operators through the SME Development Bank of Thailand.
The remaining TBH230bn will be extended to entrepreneurs and industrial estate developers through commercial banks and government-owned financial institutions.
In addition, TBH4.5bn in credit will be offered to the Industrial Estate Authority of Thailand for use in rehabilitating damaged industrial estates.
Businesses will also be allowed to extend the period to pay water supply and electricity bills, while exemptions will be given for import duties on machinery and equipment to replace damaged ones.
Crucially for the auto industry and as a result of so many car factories being hit by floods, the Ministry of Finance will also consider reducing import duties on automobiles and auto parts.
These are concrete and welcome measures from a government facing unprecedented challenges, but Thailand’s position as a pre-eminent base for auto suppliers means the administration had to act fast.
But for most suppliers, it is down to a belt and braces approach as Lam outlined to just-auto. Using almost anything they can lay their hands on, plastic bags, sandbags and foam, while building extra concrete walls and using water pumps, the supplier is doing its utmost to ensure work can start again, at some point.
Government is doing its bit but staff coming in to work this weekend to assess what else can be done are the backbone of resilience and fortitude – just as their counterparts in Japan showed so stoically early this year.
