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COMMENT: Another natural disaster the autobiz does not need

By Graeme Roberts | 10 October 2011

Thailand supplies the globe with Ford Ranger pickups

Thailand supplies the globe with Ford Ranger pickups

Ironic innit? Barely do we learn that Toyota production is back to pre-tsunami levels than another natural disaster - flooding - hits the Thai industry.

In years gone by, this would have been nothing more than a little local difficulty but Thailand is now a key export hub and any problems here will surely ripple out to much of the globe. Guess where most of the world's supply of one-tonne Japanese, Chevrolet and Ford pickup trucks come from? Handy, just as Ford's redesigned Ranger line is beginning its assault on the world and GM ramps up an all-new Colorado line.

For now, the sole directly-affected automaker is Honda whose two plants are on a flooded industrial estate in Ayutthaya. Pitak Pruittisarikorn, executive vice president of Honda Automobile (Thailand) said 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.

Most car assembly plants are in eastern Rayong province which has not been badly affected by flooding but suppliers will be a problem. "It (flooding) will affect all original equipment manufacturers (OEMs) as suppliers in Ayutthaya and in Pathum Thani (Navanakorn) supply all major suppliers," Hajime Yamamoto, Thailand director for Colorado-based research firm IHS Automotive, told Reuters. "Honda will be hit hardest due to its location but others will nonetheless feel the disruption."

Thailand is not just a souce of pickup trucks. Buy a new Honda or Nissan car in Australia, New Zealand and many Asian markets and there's a good chance it will have been built in Thailand rather than Japan. Free trade agreements, lower labour costs and more favourable currency exchange are among the reasons for this shift over the last couple of decades. Buy a new Nissan March (Micra) in Japan and take a guess where the latest generation is supplied from.

Thailand is also a source for plants overseas. Honda's underwater plant in Thailand is the 'mother plant' for the Indian unit which builds much the same vehicle model lines - including Brio and City - and it's a fair assumption the odd part for those comes from Thailand.

It's early days yet but the full ripple effect is yet to be seen and the last thing the global auto industry needs right now is a repeat of the consequences of the Japanese earthquake/tsunami disaster. IHS Automotive's comment that Ayutthaya suppliers supply all major suppliers is a chilling repetition of what happened in Japan where the hit on tier three and four widget suppliers in the northeast in turn took out supplies direct to automakers from larger players located elsewhere.

Thailand is a smaller-scale Japan but with an international auto industry punch way beyond its weight. Let's hope this is not the prelude to another knock-out blow.