Toyota Motor Corp. (7203), the world’s largest carmaker, will halt operations at all of its domestic car-assembly plants through March 26 as Japan’s record earthquake continues to delay parts supplies.
The company made the decision after checking the status of parts makers in Japan following the magnitude-9 earthquake off the coast of Sendai on March 11, said Shiori Hashimoto, a spokeswoman for the company. Toyota may lose production of 140,000 vehicles since March 14, with electronic parts, rubber and plastics in short supply, Hashimoto said.
Toyota and Japanese rivals’ efforts to resume output are complicated by the need for hundreds of different components from suppliers whose plants may have been damaged by the earthquake and subsequent tsunami. Japan also faces electricity shortages after a nuclear-power plant was crippled, as well as transportation infrastructure disruptions.
“All it takes is one plant making one item for which there’s no short-term supply to throw things off,” said Michael Smitka, professor of economics at Washington and Lee University in Lexington, Virginia, who studies Japan’s manufacturers and economy. “It’s the random stuff that affects the supply chain and could cut production for an extended period.”
Honda Motor Co. extended its closing of two auto-assembly plants and a motorcycle factory in Japan until March 27, “considering the current situation of the nationwide recovery efforts in Japan and the supply of parts from our suppliers,” the Tokyo-based company said today on its website.
Toyota’s American depositary receipts, each representing two ordinary shares, fell 75 cents to $83 at 4:15 p.m. in New York Stock Exchange composite trading. Honda’s ADRs, each representing one ordinary share, dropped $1.17, or 2.9 percent, to $38.77.
Toyota, Honda, Sony Corp. (6758) and other large manufacturers may be unable to fully restart production and shipments until the end of March, Smitka said.
“You can’t get trucks in and out of the area affected by the disaster,” Smitka said. “In some cases, a road or bridge may be open, but with only one lane available. Are you going to try to put through a shipment of machinery at the expense of getting through a shipment of food?”
“We will be able to recover in Japan and reconstruct areas hit by the earthquake,” he said. Toyoda, 54, didn’t comment directly about the impact of the earthquake and tsunami on Toyota.
Toyota has established a companywide task force to assess the impact of the earthquake on the company, its employees and suppliers, Hashimoto said.
“It may not become fully clear until they restart production where some of the problems are in the supply lines,” said John Shook, chairman and chief executive officer of the Lean Enterprise Institute in Cambridge, Massachusetts, and a former Toyota engineer.
“The extent to which they have a few suppliers in the northeast and are going to be hampered getting access to that region will have an impact,” Shook said.
To contact the editor responsible for this story: Kae Inoue at email@example.com