Honda’s Thai Production Underwater as Floods Hit Japan Firms

October 12, 2011

Honda Motor Co said its Thai plant remains underwater as flooding in the center of the country worsens, closing down 4.7 percent of its global output in a disaster that is hammering other Japanese firms that have made the nation their Southeast Asian production hub.

The flooding, in some ways reminiscent of the March 11 earthquake and tsunami that destroyed factories and crumpled supply chains in Japan, has forced local and foreign companies to shutter plants or evacuate personnel as waters rise.

Among Japan’s big three automakers, Honda risks losing the most from the floods. Toyota Motor Corp has been forced to curtail production because of disruption to its supply of parts rather than any physical damage, while Nissan said it may experience some disruption.

“Cars at the facility (in Ayutthaya, central Thailand) appear to be floating,” Honda spokesman Tomohiro Okada said.

As no one is allowed into the area, Honda is still unable to assess the damage to production machinery or give any estimate of when output, halted since Oct. 4, can restart, he added.

“We think resuming production will take some time,” Nomura analyst Masataka Kunugimoto wrote in a report.

If it takes three months, that would mean lost production of 60,000 vehicles and could shave 25 billion yen ($325 million) off operating profit, he estimated. For the year to March 31, Honda expects operating profit of 270 billion yen [$3.534 billion].

As Honda’s Thai plant supplies parts to other factories in the region, the damage may infect its supply chain and hurt output in other locations unless it can rustle up parts from elsewhere.

“Capacity utilization in Japan is already high to meet post-earthquake recovery demand, so Honda’s Japanese plants may not be able to supply sufficient volumes,” Kunugimoto said in his report.

Toyota on Wednesday said it would close its three Thai plants, which account for around 8 percent of its global production, until at least Oct. 15 because of a dearth of parts.

Nissan officials were unavailable for comment.

Other Japanese firms affected by the floods include Nikon Corp, which was forced to halt production of cameras in Thailand.

Shares of Honda fell 2.2 percent, compared with a 0.4 percent decline in the benchmark Nikkei average. Toyota fell 1.1 percent, Nissan dropped 1.8 percent and Nikon lost 4.5 percent.

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