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Toyota To Resume Prius Production in Japan; Honda Extends Plant Closures

Toyota Motor Corp. (7203) plans to resume production of the Prius and two other hybrid models in Japan as the nation’s automakers work to restart operations after an earthquake and tsunami idled plants for two weeks.

Toyota, the world’s largest maker of gasoline-electric autos, will restart assembly of the Prius and the Lexus HS250h and Lexus CT200h hybrids, which are in high demand, on March 28, said Paul Nolasco, a Toyota spokesman in Tokyo. He couldn’t confirm whether Toyota’s supply chain has been restored or if the company secured alternative sources of scarce parts.

Toyota, Nissan Motor Co. and Honda Motor Co. are working to resume domestic output following the magnitude-9 earthquake and tsunami on March 11 that killed more than 9,800 people and damaged factories. Toyota may lose production of 140,000 vehicles through March 26, with electronic parts, rubber and plastics in short supply, the company has said.

“They are clearly prioritizing Prius, given overseas demand,” said Jeff Liker, an engineering professor at the University of Michigan who researches Toyota.

“One of the constraints for Toyota’s hybrids is the supply of batteries,” said Liker, who is in Ann Arbor, Michigan. “One of three plants appears to be affected, so they may only have two-thirds of the battery supply capacity.”

Toyota’s American depositary receipts, each representing two ordinary shares, fell 95 cents, or 1.2 percent, to $81.19 at 4:15 p.m. in New York Stock Exchange composite trading. Honda’s ADRs, each representing one ordinary share, dropped 25 cents to $38 in New York.

Honda Closings

Honda extended closings at two auto-assembly plants in Japan until April 3, said Tomohiro Okada, a company spokesman. The factories are in Sayama, Saitama prefecture, and Suzuka, Mie prefecture. The Tokyo-based company’s North American factories continue to run normal production shifts, said Ron Lietzke, a Honda spokesman in Marysville, Ohio.

Honda gets more than 80 percent of its U.S. sales from vehicles made at North American plants, the most among Japan’s carmakers.

The company plans to resume production at a motorcycle plant in Kumamoto, southern Japan, on March 28, Okada said.

In addition to a shortage of parts, Japan also is facing electricity shortages after a nuclear-power plant was crippled, disrupting factory production and road and rail networks.

Honda Research Center

Honda said its research and development center in Tochigi, where the quake’s impact was most severe for the automaker, will take several months to fully recover. As a result, it plans to transfer functions such as product development, development of manufacturing technologies and procurement to other facilities.

Nissan Chief Executive Officer Carlos Ghosn said yesterday about 40 auto-parts makers remain hampered after the quake. Nissan declined to name the suppliers.

“This is serious, and it’s still difficult to evaluate,” Ghosn, 57, said yesterday in a phone interview. “You have the earthquake, you have the tsunami, rolling blackouts, and fuel shortages hitting at the same time, and they aren’t only hitting the car manufacturers, but also the suppliers and the dealers.”

Nissan will keep running normal assembly shifts at U.S. plants until at least April 1 as it assesses the parts supply situation, the company said in a statement. Nissan’s plants in Mexico and Brazil aren’t likely to be affected by supply issues, the company said.

Leaf Production

Production of the Leaf electric car and lithium-ion batteries resumed at Nissan’s factory in Oppama, Japan.

“The ability to sustain production will depend to a large degree on the frequency of rolling blackouts due to electricity shortages,” the company said.

Carmakers are jointly offering support to parts suppliers through the Japan Automobile Manufacturers Association, Ghosn said.

U.S. Prius sales jumped 47 percent in the first two months of the year, and Toyota was anticipating increased demand fueled by rising gasoline prices.

Toyota, based in Toyota City, Japan, closed all 18 auto- assembly plants in the Asian nation until at least March 26. The plants in Tsutsumi and Kyushu that produce hybrids and are scheduled to reopen March 28.

“Toyota has probably secured parts that will enable it to produce those models for a sustained period of time,” said Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo. “Starting and stopping production is the last thing carmakers want to do because of the costs involved.”

Toyota Profit

Halting production reduces Toyota’s profit by 6.5 billion yen ($80 million) a day, according to Koji Endo, an analyst at Advanced Research Japan in Tokyo.

Toyota said yesterday its North American production also may be disrupted. While the company hasn’t made specific plans to reduce shifts at plants in the U.S., Canada or Mexico, it has told workers cuts may be needed.

“It’s too early to predict location or duration” of any potential production halt in North America, Toyota said in a statement.

The automaker has operated North American vehicle-assembly and component factories normally since the March 11 quake, with the exception of canceling overtime shifts to conserve parts.

Automakers in Japan built about 9.63 million vehicles in 2010, according to the Japan Automobile Manufacturers Association.

To contact the reporters on this story: Makiko Kitamura in Osaka at mkitamura1@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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