Japanese automakers, led by Toyota, are struggling to restart production amid a shortage of parts and workers, and must now worry about a profit-sapping surge in the yen after Japan's biggest earthquake.
Toyota, the world's No.1 car company, said on Wednesday it would keep its 12 local assembly plants shut for a further week at least. The plants have been closed since Friday's earthquake unleashed a tsunami that killed at least 10 000 and damaged a nuclear power plant north of Tokyo.
Toyota's largest domestic rival, Nissan, said it would restart two plants on Thursday and Friday, but production beyond that remained uncertain. Other plants would take longer to get back on line.
Honda has also idled plants and on Wednesday reiterated its plans to suspend all production in Japan until at least Sunday.
Analysts said if production started within a couple of week, excess capacity resulting from the dip in global car sales after the financial crisis of 2008 meant the automakers might be able to make up for lost output.
But with the Japanese currency nearing a record high, the profit margin on their Japanese-made cars would shrink.
Fitch Ratings saidL “The direction of the Japanese yen over the next three to six months as a result of this catastrophe will also affect the profitability if Japanese automakers.”
The dollar has fallen three percent against the yen since the disaster and is now close to its all-time low. The dollar traded around 80.8 yen on Wednesday, just a yen away from 79.75 in 1995.
Traders and investors are watching for signs of repatriation by Japanese investors and companies because after the Kobe earthquake in 1995, the yen surged to an all-time high against the dollar based on similar flows. So far though most traders have not seen repatriation taking place.
Toyota still builds 38 percent of its vehicles in Japan, making it the most exposed to the crisis and the resulting rise in the value of the yen. It ships more than half of its domestic output to overseas markets. Nissan produces 24 percent of output in Japan while the figure for Honda is only 22 percent.
Toyota said on Wednesday that it would restart some parts production on Thursday at seven small plants near its home base in Toyota city. The same plants from Monday will also begin shipping car components for assembly overseas.
Yet, until it can restart its main factories lost production, which over the past three days has risen to about 40,000 vehicles, will mount.
Elsewhere, it has cut overtime production at plants in Thailand and North America while it assesses the impact on supplies.
Koji Endo, managing director of Advanced Research Japan in Tokyo, said plants were likely to start resuming production next week and should be back up to full capacity by the end of March.
“Even if those companies lose say 100 000-150 000 units until the end of March I think they can recapture that lost opportunity from April,” he said
Auto production in Japan is concentrated in the central and southern regions, with few big plants in the worst affected areas. Plant shutdowns could start affecting global automakers and parts suppliers within two weeks due to the integration of the industry.
Hyundai in neighboring South Korea said it didn’t expect the Japanese auto industry's woe to affect it.
A spokeswoman said: “We do not see a major impact from Japan's earthquake because we have secured an inventory of one to two months.”
Those Japanese parts makers that shipped products to Hyundai were not directly affected by the earthquake, she added
Mo Se-jun, an analyst aqt Hana Daewoo Securities, said Hyundai and affiliate Kia would be less affected by parts supply disruption from Japan than their US and European peers because they sourced most of their components from South Korean firms,
“It remains to be seen whether South Korean automakers will benefit from the disaster as Japanese automakers have a two-month car inventory,” Mo said. - Reuters