Toyota Supplier Behind Production Shutdown Pulls Forecasts

  • Aichi Steel withdraws earnings guidance after plant explosion
  • Production halt could be worse than 2011 Japan earthquake

The supplier behind Toyota Motor Corp.’s shutdown of all Japan assembly plants for at least one week withdrew its earnings forecasts, as another one of the carmaker’s group companies warned of a bigger disruption than the nation’s 2011 earthquake.

Aichi Steel Corp. said the Jan. 8 blast at its Chita plant, which supplies specialty steel for engine, transmission and chassis components, may reduce pretax profit by about 8 billion yen ($67 million) this fiscal year. Toyota said earlier this week it’s halting all assembly lines from Feb. 8 through Feb. 13 in Japan, where it produces more than 40 percent of its vehicles.

Toyota’s shutdown next week is rippling through the supply chain of the world’s largest automaker. JTEKT Corp., a maker of steering components, will halt four dedicated Toyota production lines during the carmaker’s factory shutdown. Trading company Toyota Tsusho Corp. compared the situation with Japan’s twin natural disasters almost five years ago.

The production halt this time “may be more severe than the one we experienced after the 2011 earthquake,” said Hideki Yanase, a Toyota Tsusho managing director. “There are so many types of parts that are affected and these are all different in size, materials and how they do heat treatment.”

Production at all of Toyota’s directly owned and operated plants in Japan, including parts makers, will be suspended Feb. 8, the automaker said Wednesday in a statement. The company is considering measures to minimize the impact, which could include using Aichi Steel alternate production lines or tapping other steelmakers, Toyota said.

Prius Demand

Toyota had been gearing up domestic production to meet demand for the new Prius hybrid. The company planned to boost total Japan output to about 14,000 vehicles per day, President Akio Toyoda told reporters at a Prius factory event in December. The Prius is built only in Japan.

Assuming that rate of production and an average vehicle price of about 2 million yen, the weekly lost revenue for Toyota may be about 168 billion yen, Koji Endo, an analyst at Advanced Research Japan, said in an e-mail. The hit to Toyota’s operating profit could be about 50 billion yen per week, he estimated.

Japan’s steelmakers agreed to cooperate with one another in the event of production disruptions after the March 2011 earthquake and tsunami. Aichi Steel is running other lines 24 hours a day to make up for lost output at the Chita plant, Masao Ukai, an executive vice president, said Wednesday in Nagoya.

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