Thai flooding revived predictions that foreign businesses might flee Thailand, which has endured crisis after crisis – manmade and natural – in the past decade.
November 10, 2011
by CANADIAN PRESS
TOKYO: Honda manager Hideto Maehara has swapped his car for a rubber boat to reach the company’s auto plant north of the Thai capital. A month after being inundated, the factory that makes nearly 5% of Honda vehicles worldwide is still under 1.5 metres of water.
The understandably frazzled Maehara acknowledged when the plant will recover is anyone’s guess until floodwaters that killed more than 500 people in Thailand since July and caused billions of dollars in damage to industry, subside.
“The whole area is now like a lake,’’ he said. Among Japan’s automakers, Honda Motor Co. has been the worst hit by the Thai flooding – a disaster that arrived just as automakers were recovering from the production slide caused by the March 11 tsunami in northeastern Japan that wiped out parts suppliers. Others such as Toyota Motor Corp. and Mitsubishi Motors Corp. have also suffered.
The disaster is another reminder of how vulnerable car makers and other manufacturers are to supply disruptions since their global operations rely on a myriad of sophisticated parts. Car production as far away as North America has been scaled back as the creeping floodwaters put suppliers out of action. Yet the losses are expected to be noticeably less than those caused by the tsunami.
The calamity has also revived predictions that foreign businesses might flee Thailand, which has endured crisis after crisis – manmade and natural – in the past decade. There is yet no hard evidence to support those assertions, while Japanese automakers, which rank among the biggest investors in Thailand, have said they remain committed to keeping the country as their main production base in Southeast Asia.
Toyota, Japan’s biggest automaker, said it will resume production at its Thai plant Nov. 21, indicating that Toyota may be able to bounce back from the flooding far more easily than it had from the March earthquake and tsunami. Toyota’s production in Thailand was stopped Oct. 10.
Toyota’s North American production, which had been cut since Oct. 29, is expected to be back to mostly normal by next week, although the automaker isn’t ruling out further disruptions.
As of Nov. 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, according to Toyota.
Automakers are scrambling to find alternate parts. Some Thai suppliers make parts that go into other parts, further compounding the problem.
Toyota Senior Managing Officer Takahiro Ijichi insisted that the disruption from the Thai problems was small compared to what Toyota faced after March 11, but he was quick to acknowledge the uncertainty.
Toyota, which suffered a 70% nosedive in fiscal first-half profit, has not yet given a full year forecast for earnings or vehicle production.
“Before Thailand, we thought we would be able to outdo our production forecast,’’ he told reporters and analysts this week. “Now, we just don’t know.’’
Mamoru Katou, auto analyst at Tokai Tokyo Research, said lost vehicle production from the Thai problems may total about 250,000 globally – far fewer than the 700,000 from the March disaster – but they were coming on top of each other, he said.
“Let’s hope there isn’t a third disaster,’’ he said, adding that Honda has the toughest challenge, partly because they have fewer models than Toyota or Nissan.
Stopping a plant’s operations for an extended time period was not good for worker morale and so automakers like to have them producing even on a limited scale as soon as possible, Katou said.
Nissan, which makes the popular March subcompact in Thailand and imports it back to Japan, said Thai production, which stopped since Oct. 14, was set to partly resume production Nov. 14. Production elsewhere had not been affected.
Honda has not released lost production numbers, but its Japanese plants are now working at about 50% capacity, and its North American plants are at 50% to 75% of full capacity.
Its Thai plant, which makes the Accord, Civic and other hit models, has the capacity to make 240,000 vehicles a year.
Maehara, the Honda manager, said the water came to the company’s factory in Ayutthaya on Oct. 8 and was gradual at first but pretty soon it was clear everyone had to get out.
Among other automakers, General Motors Co. and Chrysler Group LLC have said they have not had to cut production.
Ford Motor Co. stopped production at plants in Thailand and South Africa, but work is to resume at a joint Mazda-Ford plant in Thailand on Nov. 14. The plant makes the Fiesta, Mazda2 and Mazda3.
Mitsubishi Motors Corp. said its Thai plant will restart production from Nov. 14. It said more time is needed for a full recovery in the supply of parts. The plant stopped producing vehicles Oct. 13.
South Korea’s Hyundai Motor Co. said it has seen only minimal impact from the flooding.
Despite the hardships, Japanese automakers said they’ll continue making cars in Thailand. Its strong basic infrastructure such as reliable power supply and good highways is not matched in other Southeast Asian nations that have comparable or lower wages.
“Toyota is not considering shrinking its operations here,’’ the automaker’s president Akio Toyoda said of Thailand. “If anything, we hope to expand.’’
© 2011 The Canadian Press