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April 18, 2016updated 09 Apr 2021 9:53am

Japan earthquakes could slice JPY30bn off Toyota profit – report

Toyota's operating profit could be reduced by about JPY30bn (US$277m) for the current quarter after a series of earthquakes struck southern Japan and disrupted parts supplies, a media report said.

Toyota’s operating profit could be reduced by about JPY30bn (US$277m) for the current quarter after a series of earthquakes struck southern Japan and disrupted parts supplies, a media report said.

Production shifts stopped late last week at Toyota’s Kyushu factories and will extend to other Japan assembly lines in stages throughout this week, Toyota said in a statement cited by Bloomberg. Earthquakes began striking the southern island of Kyushu on Thursday and have halted some engine and parts production for Aisin Seiki, chip manufacturing for Renesas Electronics and Mitsubishi Electric and motorcycle output for Honda Motor.

Toyota’s loss of production may reach 56,000 vehicles for Toyota and Lexus and 7,500 units for minicar maker Daihatsu Motor, Koichi Sugimoto, a Tokyo-based analyst at Mitsubishi UFJ Morgan Stanley wrote in a report, Bloomberg said. The JPY30bn estimated impact to operating profit may linger into the second quarter to the end of September, he said.

The report said the earthquakes will test the business continuity plans that Toyota and other Japanese companies drafted after natural disasters hit the nation’s east coast five years ago and disrupted operations for months. Toyota relies more on domestic manufacturing than its peers, Bloomber noted – Toyota and made over 4m vehicles in Japan last year, 40 percent of worldwide output, compared with Nissan Motor and Honda’s shares of Japanese auto production of 17% and 16% respectively.

“Owing to the lessons learned from the Great East Japan Earthquake, the automakers and their suppliers have together built up strong procurement networks for components that can be rapidly restored following disasters,” Nomura Holdings analysts wrote in the report cited by Bloomberg. “As such, even supposing that production at Japanese automakers is affected for several weeks, we think that they will quickly return to normal and be able to minimise effects”” to full-year earnings.

Aisin Seiki told Bloomberg two plants that make engine and auto parts, semiconductors and other components have been halted since 14 April when an initial magnitude 6.4-level tremblor hit Kyushu island’s Kumamoto prefecture. 

Renesas’s Kawashiri plant that makes chips for cars remained shut on Monday (18 April) with workers unable to check damage inside or determine when operations will restart, spokeswoman Atsuko Arakawa told Bloomberg. Mitsubishi Electric has said last week it halted production lines at two Kumamoto factories.

Nissan’s plants on Kyushu island were to resume production on Monday after sustaining minor damage, spokesman Dion Corbett told Bloomberg.

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