THAI FLOODS - Honda to keep Thai factory shut for 6 months - reports

By Graeme Roberts | 31 October 2011

Hondas second Thai car plant shown in this 2008 artists rendering released at the time construction plans were announced

Honda's second Thai car plant shown in this 2008 artist's rendering released at the time construction plans were announced

Honda Motor is likely to have to keep its Thai factory shut for about six months due to severe flooding, a move seen affecting 3% of its annual global car output, Japan's Nikkei business daily reported. The report came ahead of a huge plunge in the automaker's fiscal second quarter and first half profits.

Japan's third largest automaker has suspended operations at its factory in central Thailand for weeks, with no sign of a restart, Reuters noted.

As well as supplying the Thai and other Asia-Pacific markets with unique 'emerging market' cars such as the entry-level Brio hatchback and City sedan, the Thai plant is also a 'mother factory' for other Honda plants overseas such as the Indian plant that also makes the City and Brio.

The company believes it will have to replace most of its Thai car equipment and facilities that were submerged by floodwaters, the Nikkei said, citing a company executive.

Honda is the only Japanese carmaker whose Thai car factory was inundated, the paper noted.

The half-year suspension would affect production of over 100,000 vehicles, it said.

Honda said in a statement on Monday (31 October) that Honda Automobile (Thailand), which suspended production on 4 October due to parts supply disruptions and was flooded on 8 October, did "not have a clear outlook for when production will resume as flooding on its facilities has continued".

Thai Honda Manufacturing, the motorcycle and power products production subsidiary, did not have any flood water on its property but had been suspending its motorcycle production since 11 October, and power products production since 6 October, due to parts supply disruptions. Production would remain suspended until 4 November and a further decision would be made on 7 November, the statement added.

"Other Honda plants in Asia have been making adjustments to production volume or suspending production due to the limited parts supply from Thailand," the automaker said.

In Japan, automobile production operations at Suzuka and Saitama would "begin production adjustments" on 7 November, "due to the limited parts supply from Thailand".

"Honda is making progress in procuring alternative parts and the timing to normalise production will be determined while monitoring the situation in the future," the automaker said.

"Honda operations in other regions also are being impacted by the limited parts supply from Thailand. Each operation is carefully examining the situation."

Honda on Monday anounced fiscal second quarter and first haf financial results. Q2 operating income plunged to JPY52.5bn from JPY163.4 in Q2 2010. The half-year result was off JPY322.8bn from JPY397.9bn in H1 2010 to JPY75bn this year.

Profit had been forecast to fall 61%, according to a Reuters survey of 13 analysts.

"Honda is currently evaluating the extent of the damage resulting from the floods, and it is not possible to reasonably estimate the impacts on the consolidated and unconsolidated financial results at this time," the automaker said in a statement announcing the Q2/H1 results.

"Therefore, forecasts of the consolidated and unconsolidated financial results for the fiscal year ending 31 March, 2012 are not determined. Honda will release the forecasts as soon as they become available."