Toyota Motor Corp. might see its operating profit reduced by about 30 billion yen ($276.15 million) for the current quarter after a series of earthquakes struck southern Japan and disrupted parts supplies to the world’s largest automaker.
Production shifts stopped late last week at Toyota’s Kyushu factories and will extend to other Japan assembly lines in stages throughout this week, Toyota said in a statement. Japan’s most devastating earthquakes since March 2011 began striking the southern island of Kyushu on Thursday and have halted some engine and parts production for Aisin Seiki Co., chip manufacturing for Renesas Electronics Corp. and Mitsubishi Electric Corp. and motorcycle output for Honda Motor Co.
Toyota’s loss of production could reach 56,000 vehicles for Toyota and Lexus and 7,500 units for minicar maker Daihatsu Motor Co., according to a report from Koichi Sugimoto, a Tokyo-based analyst at Mitsubishi UFJ Morgan Stanley. The 30 billion-yen estimated impact to operating profit could linger into the second quarter through September, he said.
The earthquakes will test the business continuity plans that Toyota and its Japanese peers drafted after natural disasters hit the nation’s east coast five years ago and disrupted operations for months. The stakes are high for Toyota because it relies on domestic manufacturing more than its peers. The company and its affiliates made more than 4 million vehicles in Japan last year, 40% of their worldwide output. Nissan Motor Co. and Honda Motor Co.’s shares of auto production from Japan were 17% and 16%.
“Owing to the lessons learned from the Great East Japan Earthquake, the automakers and their suppliers have together built up strong procurement networks for components that can be rapidly restored following disasters,” Nomura Holdings Inc. analysts wrote in a report Monday. “As such, even supposing that production at Japanese automakers is affected for several weeks, we think that they will quickly return to normal and be able to minimize effects” to full-year earnings.
Toyota fell as much as 6.8% and was down 5.1% Monday morning. The shares have declined 27% this year.
Other Production Problems
Aisin Seiki Co. said two plants that make engine and auto parts, semiconductors and other components have been halted since April 14, when an initial magnitude 6.4-level tremblor hit Kyushu’s Kumamoto prefecture.
Renesas’s Kawashiri plant that makes chips for cars remained shut Monday, with workers unable to check damage inside or determine when operations will restart, spokeswoman Atsuko Arakawa said by phone. Mitsubishi Electric said last week it halted production lines at two Kumamoto factories.
Honda has suspended production at its motorcycle plant in Kumamoto since the Thursday quake and is extending the halt to April 22, according to spokesman Ben Nakamura. Nissan’s plants on Kyushu island will resume production Monday after sustaining minor damage, spokesman Dion Corbett said.
Subaru maker Fuji Heavy Industries Ltd. and Mazda Motor Corp. were operating their assembly plants Monday and checking with components makers about whether their supply chains would affect production.
Toyota’s domestic assembly lines are shutting down for the second time this year. In February, the company halted factories for one week after an explosion and fire at a plant run by affiliate Aichi Steel Corp. disrupted engine, transmission and chassis component supply.
By Craig Trudell