Japan automakers eye restart at half of output plans

By Chang-Ran Kim

TOKYO (Reuters) – Japan’s top automakers plan to resume production at all domestic factories in stages starting on Monday, but output levels will be at half of original plans and at the mercy of parts availability, while fresh power outages further clouded the outlook.

A historic 9.0-magnitude earthquake on March 11 off Japan’s northeastern coast damaged equipment, cut off electricity and disrupted automakers’ complex supply chain over the past month, forcing them to suspend work at most factories.

On Thursday night, another big tremor shook the devastated coast of northeast Japan, cutting off power to tens of thousands of households and causing a key supplier to the auto industry, Renesas Electronics, to shut four factories.

Despite the new disruption, Toyota Motor Corp said its group will reopen all 18 factories that build Toyota and Lexus cars from April 18 to 27, including a brand new site owned by subsidiary Central Motor that has lost power from Thursday’s quake.

With supply of about 150 components still disrupted, Toyota said it would work at about half the rate of initial plans. Its factories will be closed, as planned, between April 28 and May 9 for Japan’s “Golden Week” holidays and Toyota will decide on production plans beyond that while monitoring the flow of supply.

The world’s biggest automaker had restarted limited production of three hybrid models at two plants on March 28, and a third factory will begin producing two more models next Monday. It has lost potential production of 260,000 units during the unprecedented 20-day suspension to date.

Second-ranked Nissan Motor Co said it would resume normal production using parts delivered from suppliers, rather than inventory, in stages starting on April 11, with the last assembly plant to resume on April 18.

A dearth of supply from Renesas, the world’s top maker of microcontroller chips, is one of the main headaches for automakers, including those outside Japan that have been affected by the earthquake. A Renesas spokeswoman said it was not clear when manufacturing would resume, although power had been restored to one plant.

Even as Japanese factories gradually resume work, analysts expect production overseas to begin falling as parts run out. Nissan said it would halt output at its Sunderland plant, in northeast England, for three days later this month, while Toyota and Honda are also bracing for lower output in some factories outside Japan.


Credit Suisse analysts have drawn up a base scenario under which Japanese automakers’ global output would fall 19 percent in the business year that started this month assuming several factors, including the restart of Renesas’ damaged Naka factory in July. Depending on how smoothly the recovery goes, the drop could range between 15 and 50 percent, the brokerage said.

The head of Honda Motor Co, which is due to restart limited production at all car plants on April 11, said he wanted to return to production levels before the March 11 quake in two to three months.

Honda also said its production cuts in North America would be extended by one week through the week of April 18.

“We will strive to get back to normal operation as soon as possible by stabilizing parts supply while also considering other options including changing the model mix at some production plants,” Chief Executive Takanobu Ito told reporters at Honda’s quake-hit R&D center in Tochigi prefecture on Friday.

Ito, who visited the Tochigi site on his motorbike two days after the earthquake, said he expected a two-week delay in vehicle development which he hoped to make up during the current business year. The earthquake last month badly damaged the R&D facility, killing one employee when a wall collapsed on him.

Toyota shares ended up 1.4 percent, Honda rose 1.4 percent and Nissan lost 0.8 percent, while the main Nikkei average put on 1.9 percent. Toyota shares in New York were up 1 percent on Friday morning.

(Additional reporting by Kentaro Sugiyama in Haga-machi, Tochigi, and by Ben Klayman in Detroit; Editing by Joseph Radford and Matthew Lewis)

Japan automakers eye restart at half of output plans