Toyota resumes production, but Honda still in trouble

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Toyota should have resumed production in Thailand on November 21, one month after the severe flooding forced it to suspend operations.

Toyota has three plants in Thailand with the ones at Samut Prakan and Chachoengsao provinces unaffected directly by the flooding; however, production was halted on October 10 due to supply chain disruptions after flooding hit industrial estates in Thailand’s central provinces.

The company is confident that parts can be supplied but it has not yet decided whether to resume production at all three plants, which have total production capacity of 650,000 units per year.

Toyota Motor Thailand Co., Ltd. has 13,500 employees with registered capital of Bt7.5 billion.  As of November 12, the floods had cost Toyota 150,000 vehicles in lost production, nearly 90,000 of that in Thailand, and 40,000 in Japan.  The floods were affecting supplies of some 100 items, including resin and electronic parts.

Toyota has already decided to continue the output cut at its Japan-based plants and to downsize production at plants in other countries except Thailand.  Reassuring to the Thai government is the statements from Toyota that it does not foresee downsizing the local production, despite the flooding.

Nissan Motor and Mazda Motor have also decided to resume production of some models in Thailand.  Honda, on the other hand has been the worst hit of all the automakers in Thailand, with two plants submerged for over four weeks.

Honda’s local problems have had a far reaching effect, with shortages in the US and closure of their plant in the Philippines.  The Thai factory that makes nearly five percent of Honda vehicles worldwide was still under 1.5 meters of water after a month.

Honda Motor Co. has been the most affected by the Thai flooding – a disaster that arrived just as Honda was recovering from the production downturn caused by the March 11 tsunami in Japan that wiped out parts suppliers.  The situation being similar to the Thailand problem where not only the assembly plants were under water, but as many as 79 parts manufacturers have also had to cease production from the inundation.

The disaster is another reminder of how vulnerable car makers and other manufacturers are to supply disruptions since their global operations rely on a just-in-time delivery system of sophisticated parts.  Car production as far away as North America has been scaled back as the Thai flood waters put suppliers out of action.  Yet the losses are expected to be noticeably less than those caused by the tsunami, according to the Japanese arm of the company.