As Floods Recede, Toyota's Recovery Slowly Continues
Blame flooding. In Thailand.
In a great example of the regional interconnections that drive global commerce nowadays, widespread floods in Thailand have disrupted production of key parts for several major automakers, throwing factories around the world off their paces. Honda and Toyota have taken particularly hard hits, but other major automakers have suffered significant losses as well -- and not all of them are based in Asia.
While a full recovery -- and a full accounting -- will take more time, fortunately for those affected, the recovery has already started.
Floods felt around the world
Thailand is an important regional production hub for many global automakers, but it's also home to factories belonging to some of the companies that supply those automakers -- including a few that make critical parts unavailable anywhere else. When the worst floods in 70 years hit the nation this fall, those suppliers -- and other electronics firms, including Western Digital (NYS: WDC) and other companies that supply hard drives to computer makers like Dell (NAS: DELL) -- suffered severe damage to their factories, bringing production to a halt.
Hard drive shortages are likely to afflict PC makers for the next several months, but it's the automakers that saw the largest impact, with lost production expected to total more than 250,000 vehicles worldwide. The auto industry has a huge presence in Thailand. While some automakers had factories of their own in flooded areas, it was the shortages of key parts like electronic components for audio and navigation systems that caused slowdowns and production halts at auto plants around the world.
Honda and Toyota, which were just recovering from the effects of an earlier natural disaster -- the March earthquake and tsunami in northern Japan -- both reported subdued quarterly earnings and withdrew previous full-year guidance as they continue to assess the impact of this latest mess. But some of the impact has already become clear.
The recovery is beginning, but it'll take awhile
At least for Toyota, the worst may have passed, though the company says that it has already lost production of 150,000 vehicles, mostly in Thailand and Japan. Toyota's factories in South Africa and several Asian nations continue to run at a reduced pace, and the company isn't yet sure (or at least isn't yet saying) when those plants will return to normal. But the company's North American production is back up to full speed after a brief dip, and it expects production in Japan to return to normal levels this week. And its facilities in Thailand -- which didn't suffer flood damage -- are back up and running at capacity.
Honda, on the other hand, will struggle for a while longer. The company has already lost 100,000 units of production, according to one report, and the production schedules for its six North American plants remain uncertain. Honda has been able to restore some production in Thailand as floodwaters have receded, though its main plant in Ayutthaya may not be able to restart until next month.
Nissan and Ford (NYS: F) also suffered some losses. Ford and Mazda operate a joint-venture factory in Thailand that primarily makes Ford Ranger pickups and a related Mazda model. Although the factory itself wasn't flooded, parts shortages stopped the assembly lines and cost Ford about 30,000 units. Tata Motors (NYS: TTM) was forced to shut down its Thai pickup plant for a while as well.
Not all automakers with a presence in Thailand suffered significant damage. General Motors' (NYS: GM) plant in Rayong was spared -- in fact, the company has been offering free parking at the plant to Chevy owners from flood-affected areas, with 24-hour security and shuttle buses to and from Bangkok.
But while the impact of the Thai floods is unlikely to reach the 700,000 units lost due to the Japanese tsunami, it's already clear that the effect on Toyota and Honda's efforts to recover momentum around the world will be significant.
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At the time this article was published Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford Motor and Western Digital. Motley Fool newsletter services have recommended buying shares of Ford Motor, General Motors, and Dell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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