Regional News
BANGKOK—Thailand’s auto exporters are being hit by supply-chain disruptions following the worst flooding the country has seen in nearly half a century.
The Southeast Asian nation is a major production and export hub for global auto makers, including Toyota Motor Co., Ford Motor Co. and Honda Motor Co., and all three have now shut their plants in the country after weeks of worsening flooding overwhelmed a cluster of component plants in Ayutthaya, 67 kilometers, or 42 miles, north of Bangkok. Isuzu Motors Ltd. also halted production on Tuesday at its two Thai plants due to disruptions in parts supplies.
While Honda’s plant in the area was flooded, Ford’s and Toyota’s facilities are located on Thailand’s eastern seaboard, away from the area in immediate danger. Industry executives say the auto giants rely on the same kind of just-in-time delivery systems in Thailand that crumbled after the Japan disaster earlier this year.
The broken supply chains threaten to worsen the economic fall-out from the floods. While many supply chains in Japan were mostly restored within weeks after that country’s March 11 earthquake and tsunami, unusual weather patterns in Thailand this year means it’s difficult for meteorologists here to predict when conditions might allow regular business to resume.
At least 269 people have been killed since late July and government officials estimate that the economic damage could surpass 80 billion baht ($2.6 billion), and trim nearly one percentage point from the country’s economic-growth forecast. Prior to the floods, Thailand’s National Economic and Social Development Board forecast the economy would expand between 3.5% and 4% this year.
On Tuesday afternoon, rescue workers and government teams were scrambling to bolster flood defenses to prevent waters from flowing into Bangkok, the country’s economic and financial heart.
“It could be something as simple as wiring systems, but if the auto makers can’t secure a supply of it then they can’t build the car,” said one businessman involved in the supply of auto parts here.
Still, some analysts, such as Fernando Roxas, a professor at the Asian Institute of Management, have argued that the benefits of Toyota-style just-in-time delivery systems help make businesses so efficient during the good times that they are willing to take the risk of incurring supply-chain disruptions from time to time.
Ford said it expected to suspend production at its Thai plant for 48 hours to allow for a full assessment of its inventories and logistics. The U.S.-based auto giant exports to about 150 auto markets from Thailand as well as supplying local demand.
Over the past several days, Toyota has suspended production at its three local plants with a combined capacity of 550,000 vehicles a year.
“We can’t tell when we will be able to resume operations. We are now evaluating the situation on a day-by-day basis,” a senior company official who declined to be identified said. Thailand accounts for just 8% of the company’s planned total 2011 global production.
Toyota will maintain its local 2011 production target of 680,000 units, another local company official said.
“We will still deliver cars to our customers normally as we have cars in stock,” the official added.
Thailand is a key growth market for Toyota. It grabbed the largest share of local sales in the first six months of the year with 36% of unit sales. In the first eight months, Toyota sold 216,000 vehicles, up 9.3% from a year earlier, a spokeswoman said.
Mitsubishi Motors said a local production facility was spared by the floods, and the company has enough parts on hand to continuing its local assembly operations through Wednesday, a spokeswoman said. It may suspend production after that.
The Honda plant in an industrial estate in Ayutthaya, north of Bangkok, has been closed since Oct. 4, while a spokesman for Nissan Motor Co. said its operations remain unaffected at this time.
Write to James Hookway at [email protected]
==============================================================================
By: James Hookway with contributions from Oranan Paweewun, Yoshio Takahashi, and Phisanu Phromchanya
Source: The Wall Street Journal, Oct. 12, 2011
To view the original article, click here.
Comment here