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JAPAN: Toyota scraps forecast as Thai floods hit

By Graeme Roberts | 8 November 2011

Toyota has followed Honda in scrapping profit forecasts after Thailand’s worst floods in almost 70 years hit efforts to recover from the Japanese earthquake on 11 March and its second quarter net profit slumped 18.5%.

"As a result of delays in parts supply due to the recent catastrophic flooding in Thailand, Toyota and our subsidiaries have halted production or adjusted utilisation hours at plants in countries and regions, such as Asia, Japan, and North America. The effects of the floods on the future production at these plants are yet to be assessed. Therefore, a reasonable forecast for [fiscal full year 2012] cannot be made at this point," Toyota said in a statement today (8 November).

The floods have halted production at Toyota's southeast Asian manufacturing base in Thailand - a key source of models such as the Hilux pickup for markets such as Australia - and disrupted output as far away as North America.

That has allowed General Motors, Volkswagen and Hyundai Motor to gain market share in the US, while the yen’s gains erode the value of Toyota’s exports, Bloomberg News noted.

Carmakers “may try to shift away from Thailand, because we don’t really know what’s going to happen to Thailand in the rainy season next year,” Yuuki Sakurai, president at Fukoku Capital Management in Tokyo, told Bloomberg. “By the time the problem is over, who knows, we may have another rainy season again.”

The Thai disaster cost Toyota about 150,000 units of lost production from 10 October to 12 November, Bloomberg said.

“There is only so much they can do to make up for the losses from the Thai floods” as Toyota was producing at full capacity to make up for output lost to the Japan earthquake, Koji Endo, an auto analyst at Advanced Research Japan said. He estimated a three-month disruption may cut the automaker’s operating profit by JPY200bn, Bloomberg said.

The flood has caused a shortage of components, leading output levels to drop to about 80% of capacity in Japan and 90% in North America, Takahiko Ijichi, a Toyota senior managing officer, told Bloomberg at Toyota's headquarters in Nagoya, Japan.

Ijichi added the floods probably would not delay the launch of new models and Toyota may be able to resume production as early as this month.

The disruptions from the March earthquake led to a combined 18.5% drop in output in the fiscal first half, the Japan Automobile Manufacturers Association told Bloomberg.

The Thai floods struck too soon for Toyota to apply the lessons learned from the disaster at home, according to the company.

“After learning our lesson from the March earthquake, we actually had plans to build up on parts inventory,” Satoshi Ozawa, executive vice president of Toyota, told Bloomberg in Tokyo today. “The floods in Thailand came before we could do anything, and we are facing another round of production disruptions.”

The floods in Thailand will probably push back expansion plans at Toyota and Honda until the first quarter of 2012, according to Tracy Handler, a Troy, Michigan-based analyst with IHS Automotive.