Flooding in Thailand, a major manufacturing hub for several Japanese automakers, has led to new shortages of critical parts for both Toyota and rival Honda
And while walls of sandbags may ultimately spare the three Toyota factories near Bangkok from significant damage, the damage to the company's upcoming earnings report may already have been done. That would be another blow for the Japanese giant, which -- surprisingly -- continued to see its U.S. sales decline in October.
Another hard hit for the Japanese giant
A Toyota spokesperson told Bloomberg on Monday that the company was "still assessing" the effect of the flood on its earnings, but it's already clear that the impact will be significant. Although Toyota's factories are still undamaged, Toyota hasn't been able to produce vehicles in Thailand since Oct. 11 because of parts shortages. Flood-related shortages of parts, particularly electronic components, have hit rival automakers Tata Motors
Already, parts shortages have disrupted production at Toyota plants in Indonesia, the Philippines, Vietnam, and Canada, as well as in the U.S. and Japan. Analysts at Credit Suisse have estimated that the company could lose production of 250,000 vehicles worldwide through Nov. 20 as a result of the flooding, blowing a 125 billion yen ($1.6 billion) hole in the company's operating profit. That won't be welcome news for Toyota shareholders, who have seen their shares drop almost 30% since the March disaster -- and who recently seemed to have cause for optimism.
There is some good news, however, starting with the fact that the impact on supplies of vehicles for the U.S. has so far been limited. While the company was forced to eliminate overtime shifts at five Japanese plants last week, including the plant that produces the Prius for the U.S., because of parts shortages, the company expected to lose just 6,000 units of production -- about 10% of Toyota's weekly output in Japan.
More could be lost this week and in the coming weeks if shortages persist, but at least for the moment, the company expects the impact on exports to the U.S. to be small. And so far the effect on Toyota's North American factories has been similarly small, with disruptions mostly limited to cuts in overtime shifts.
That, in turn, means that Toyota's long-anticipated U.S. sales surge should continue. And that's good news for shareholders, because that surge hasn't gotten off to the strongest start.
Still struggling in the U.S.
Defying analyst predictions and widespread expectations that October would see Toyota making up significant lost ground, the company's U.S. sales were down 7.8% versus year-ago figures for the month. That follows the pattern of monthly declines we've seen from Toyota since the tsunami. It's a surprising result that stands in contrast to incremental gains from Ford
Toyota fared somewhat better in Japan, its most critical market. Sales of Toyota-brand vehicles were up 22.2% in October over year-ago numbers, lagging the market's total growth by a bit but showing that the company's home-market supply issues were largely resolved -- at least until the Thai disruptions.
Although details had yet to emerge as this article went to press, the U.S. decline raises important questions. For weeks, we've heard that Toyota's U.S. supply problems were largely resolved -- as they appear to have been in Japan -- and that aggressive efforts would be made to make up lost market share in the United States. But apparently those efforts have yet to generate the hoped-for impact on sales totals. Was the problem one of supply -- and something we can expect to be resolved eventually? Or is demand for Toyota's products finally eroding here, with longtime loyalists finally considering the strong alternatives from Detroit and South Korea? Keep an eye on this one.
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