Apr 19, 2016
TOKYO -- Deadly earthquakes will shut down virtually all Toyota production in Japan over the next week, torpedoing exports of Lexus products, the Prius hybrid and some trucks at a critical time when Toyota is trying to get more crossovers for the U.S.
Suspended vehicles include the hot-selling Lexus RX and NX crossovers and the Toyota RAV4. Also hit are the Toyota 4Runner and Land Cruiser SUVs and the Lexus GX and LX SUVs.
The stoppage comes as other automakers cut back on output or reassess production plans after the quakes in southwest Japan knocked some suppliers offline. Affected suppliers still had no time line for resuming operations as of late Monday in Japan.
For Toyota, the interruption in crossover supply comes at a bad time for the world’s biggest automaker as it scrambles to boost light truck sales to tap booming U.S. demand for the vehicles.
Toyota, with a relatively car-heavy lineup, has been unable to fully capitalize on the market shift toward crossovers.
Toyota Motor Sales’ U.S. volume slipped 1.1 percent to 569,079 units through March, in an overall market up 3.3 percent. Cars account for about 49 percent of Toyota’s U.S. sales, compared with 31 percent at General Motors Co. and 30 percent at Ford Motor Co.
Toyota’s shutdowns, announced Sunday, come amid a worsening supply chain crunch triggered by twin earthquakes that hit the area around Kumamoto city on Japan’s southwestern island of Kyushu.
The first of the latest quakes, a 6.2-magnitude temblor, struck the night of April 14. A second stronger one, measuring 7.0 magnitude, rattled the area again early Saturday morning.
The twin disasters killed more than 40 people and injured more than 1,000, with rescue workers continuing to dig out others trapped under collapsed buildings, local media reported.
Big test
The latest earthquakes are the biggest test yet of Japan’s efforts to fortify its supply chain against external shocks since the March 2011 earthquake-tsunami disaster knocked domestic output offline for months. Since then, Japanese automakers have tried to double-source parts and introduce backup manufacturing plans.
Toyota’s new suspensions, announced April 17, affect flagship production plants in the Aichi area around Toyota’s headquarters, as well as plants in northern and western Japan.
Toyota said it is also idling output at two lines operated by its Hino truck-making subsidiary and at one assembly plant run by its Daihatsu minicar unit. Toyota also is keeping offline its Kyushu plant near the epicenter of the two deadly temblors.
Toyota will phase in the suspensions starting Monday, April 18, with more than 10 factories affected by April 23.
Toyota aims to decide on April 20 whether it can resume production from April 25, spokesman Ryo Sakai said.
Only three operations will remain open: One line at a Hino truck plant, a Daihatsu plant and a line that makes the extremely low volume Toyota Century luxury limousine.
All other domestic lines at Toyota will be down, affecting virtually every nameplate exported to the U.S. The list includes the Lexus ES, LS, IS and GS sedans as well as the RC coupe and CT hatchback. Also on hold is production of the Scion tC and xB, as well as the new Mirai hydrogen fuel cell vehicle.
Toyota could not say how many units of production would be lost. But the company and its affiliates produced 312,365 vehicles in Japan last April, implying daily output of around 16,440 vehicles. One estimate, from Mitsubishi UFJ Morgan Stanley analyst Koichi Sugimoto, puts Toyota and Lexus lost production at 56,000 vehicles and a 7,500 units for minicar maker Daihatsu Motor Co. The 30 billion yen ($277 million) estimated impact to operating profit may linger into the second quarter through September, he said.
This is the second time this year Toyota has had to scrub production because of supply chain woes.
In February, the company suspended production at all assembly lines in Japan for six days. A Jan. 8 explosion at a steel factory in Japan torpedoed supplies of steel used in parts such as engines, transmissions and chassis systems.
The explosion occurred at an Aichi Steel Corp. plant in Chita city in Aichi prefecture, Toyota's home region and its main production base.
Other automakers
Other automakers are idling production lines as well.
Nissan Motor Co., which has two plants on the southwestern island of Kyushu, where the quakes were centered, had scrubbed production on Saturday.
On Sunday, Nissan said that it would resume output at the plants the following day “following an assessment of our plants and supply chains.” Both of its plants were slightly damaged.
Mitsubishi Motors Corp. suspended part of a shift at one plant on Monday and said it would cut skip one shift in its entirety on Tuesday and Wednesday for lack of parts. Mitsubishi’s shutdown affects output of minivehicles for the Japan market.
Mazda Motor Corp., which has its two Japanese plants in the western part of the country, said it had confirmed steady parts supply to keep its factories running through April 22. Mazda is still assessing the impact beyond then, a spokeswoman said.
Meanwhile, Subaru maker Fuji Heavy Industries Ltd. and Honda Motor Co. were monitoring their supply chains, but didn’t expect interruptions. Both those manufacturers have the bulk of their operations in eastern Japan, though Honda has stopped operations at a motorcycle factory in the quake zone.
The critical weak links are suppliers hit by the quakes. And one name is a familiar bottleneck: Renesas Electronics Corp.
History is repeating itself with Renesas, a key maker of the microchips controlling everything from fuel injection to airbags, halting operations at a plant in the quake zone.
Renesas crashed the global supply chain in 2011 when a massive earthquake in Japan took one of its plant off line for months. That factory was in northeastern Japan -- the one hit by the latest quakes is the southwestern city of Kumamoto.
Falling cars
Toyota and Nissan had already suspended operations on Saturday.
After the Saturday quake, Nissan reported that its nearby plant operated by Nissan Motor Kyushu Co. sustained light damage. In one instance, several cars fell from suspended production lines during the shaking, a spokesman said.
That quake hit during a break in the plant’s second shift, and no one was injured. A nearby plant, run by Nissan Shatai Co., was also lightly damaged, but the spokesman did not have details about Nissan Shatai’s status.
Nissan Motor Kyushu makes such vehicles as the Rogue and Murano crossovers, the Note hatchback, the Teanna sedan and the Serena van. Nissan Shatai manufactures the Infiniti QX80 and Nissan Patrol SUVs and Nissan Quest van, among other nameplates.
Earlier this month, the Nissan Motor Kyushu plant began producing the hot-selling Rogue to feed booming U.S. demand for the crossover. But it has not begun shipping the vehicles yet.
Both the Nissan Motor Kyushu and Nissan Shatai plants reopened on Monday and were expected to stay up, a spokesman said.
Chips down
Fallout from the quake threatened to spread wider with Renesas’ Kawashiri plant in Kumamoto knocked offline.
A spokeswoman said she believed the plant ships automotive microcontrollers to areas outside Japan.
But she could not give details about customers or say what percent of the company’s total MCU output the plant represents.
Resumption efforts have been hampered because aftershocks are preventing workers from re-entering the plant to assess damage, the spokeswoman said.
By Sunday morning, they had gained brief access to the plant’s fragile clean room, which appears to have damaged equipment.
Access was to the clean room was delay because special safety precautions must be taken when accessing that area because of toxic gas and fluids used in clean room operations, she added.
Still, Renesas expects damage to be lighter than that sustained during the 2011 earthquake, she said. That is because the jolting of the latest quakes was not as violent and because Renesas has reinforced its factories since the 2011 disaster.
There were no injuries at Renesas, Nissan or Toyota. It was unclear when the plant would resume work, the spokeswoman said.
Renesas was not the only supplier bottleneck.
Aisin, Mitsubishi Electric
Also in the Kyushu quake zone, Aisin Seiki halted operations at two plants. One is a body parts factory making such items as sunroofs, door frames and door handles. The other makes die-cast engine parts. There were no injuries at either factory, both in Kumamoto city.
Operations at both parts plants stopped immediately after the quake, but workers were unable to get inside to evaluate the factories until Friday evening because of aftershocks. A spokesman said it appears there is damage inside the plants. The exteriors of the plants have minor structural damage, including collapsed walls and broken windows, the Aisin spokesman said.
Aisin did not indicate when production would resume.
One problem is that the area is suffering a power outage and the factory can’t get electricity, a spokesman said.
The company has only minimal inventory of parts and is taking a two-pronged approach to recovery, the spokesman said.
While trying to restore operations in Kyushu, it is simultaneously planning to shift production to other plants in Japan. Output from Aisin’s plants in Kyushu primarily supplies auto assembly inside Japan and not overseas, he added.
Also among the stricken parts makers: Mitsubishi Electric Corp. It has two plants offline in the disaster area. One makes power semiconductors for use in electric and hybrid vehicles, among other products outside the automotive industry, including air conditions and train motors. The other makes TFT liquid crystal modules that can be used in car navigation systems.
A spokeswoman said workers are checking their production lines and that it was uncertain when their operations would resume.
Source: Automotive News