A month after the natural disasters, an update on Toyota and its affiliates

On Friday 11 March, northeastern Japan was hit by the double whammy of a 9.0 earthquake, among the five strongest ever recorded, plus the numerous aftershocks and intense tsunami it unleashed. The repercussions were almost innumerable, and today, a month later, are still being felt, and undoubtedly will be for many more months to come.

Here, from our Toyota-centric vantage point of view, is an update on what has occurred at the carmaker’s diverse affiliates since we last addressed the subject on Thursday 17 March (for Toyota) and Tuesday 22 March (for Subaru):

TOYOTA MOTOR CORPORATION (including LEXUS and SCION)
Toyota didn’t issue a formal press release update extending the shutdown of its Japanese facilities (including subsidiary vehicle manufacturers) beyond Saturday 26 March. Instead, Japanese production was or will be started on a gradual basis, at specific facilities at first and at roughly 50% of production capacity overall under the following schedule:

Monday 28 March: Resumption of Toyota Prius production at the Tsutsumi plant in Toyota City, Aichi Prefecture and of Lexus CT and HS production at the Kyushu plant in Fukuoka Prefecture. No units were built on Wednesday 30 March, however, as the day was designated to double-check parts inventories.

Monday 11 April: Resumption of production at affiliate Central Motor Company’s Sagamihara Plant in Kanagawa Prefecture, south of Tokyo. The Sagamihara facility had been slated to close down at the end of March in favor of Central Motor’s new Miyagi Plant, but the latter’s proximity to the March 11 tsunami landfall site of Sendai has given the older facility a stay of execution. Sagamihara produces the Toyota Corolla Axio (the ubiquitous-in-North America Corolla sedan) and the Toyota Raum (a 5-passenger mini-minivan built on the Yaris/Vitz platform).

Monday 18 April: Resumption of production at all other Japanese production sites (including, to the surprise of some, the Central Motors Miyagi plant). As with the first week of Prius/CT/HS production, there will be a Wednesday 20 April non-production day to assess the parts and components situation and inventories.

Thursday 28 April thru Monday 9 May: All plants will be closed during this period, for Japan’s “Golden Week” holidays (a traditional closing time unrelated to the earthquake/tsunami aftermath). To quote a Toyota Global Newsroom press release, “A decision on post-holiday production will be made after assessing the parts supply situation”.

Conversely, as Japan is ready to cautiously start vehicle production again, North American facilities will shut down for five days to help conserve parts and to assess inventories. No layoffs will result from these production stoppages, and on these non-production days, the approximately 25,000 North American production employees may report to work for training and plant improvement activities, use vacation, or take unpaid time off. The five days in question are Friday 15 April, Monday 18 April, Thursday 21 April, Friday 22 April and Monday 25 April. All days apply to all North American factories, except that Thursday 21 April is a regular work/production day at the Georgetown, Kentucky facility that assembles Toyota’s Camry, Camry Hybrid, Avalon and Venza models. Overall, Toyota spokesman Mike Goss estimates that the production-curtailing measures taken from March 11 until April 25 will result in the production of 35,000 fewer vehicles in North America versus normal, ideal conditions.

On the parts front, a Reuters report is cautiously optimistic, noting that during March, the production of as many as 500 components was disrupted, but the number is now down to about 150. As to replacement parts, a Toyota USA Newsroom press release from Tuesday 29 March includes the following pertinent information:

(I)n order to maximize future availability, approximately 233 part numbers, out of over 300,000 active part numbers (less than 1%), have been placed on controlled allocation. Controlled allocation means orders must be made manually via a special order release form and must be for a specific customer vehicle. By taking this step, we can help conserve parts until the flow from Japan returns to normal.

While the above stops short of identifying the precise parts in question, Reuters, citing a dealer memo, lists steering wheel covers, shock absorbers, door fixtures, seals, airbag sensor components, mudguards and certain moldings as falling under controlled allocation.

Toyota also notes that, as of Friday 8 April, about 260,000 production units have been lost since the Great East Japan Earthquake struck. This is expected to cost the carmaker at least 100 billion yen ($1.2 billion) in lost earnings for the fiscal year that ended March 31 and 200 billion yen this year, according to Koji Endo, an analyst at Advanced Research Japan in Tokyo. The “no overtime to conserve parts” edict has further spread to Toyota’s China, Thailand and United Kingdom factories, the latter including both the assembly plant in Burnaston, England, and the engine plant in Deeside, Wales that build Toyota Auris, Auris HSD (Hybrid) and Avensis models.

As to sales, an update of sorts to our previous story from 25 March 2011 story is information from Edmunds AutoObserver that Toyota’s U.S. inventory at the end of March was about 352,000 units, equating to a 55-day overall supply, which compares quite favorably to the 16-day inventory during and immediately after the Cash-for-Clunkers government incentives offered last summer. Current Toyota Prius inventory information stands at 12,250 units available as of Tuesday 5 April per Edmunds, while The Detroit News cites an 18-day supply as of Sunday 3 April.

A Bloomberg article, however, paints a more ominous picture starting around mid-May. As Bob Carter, Toyota’s group vice president of U.S. sales, said in a memo to dealers, “Toyota will be producing new vehicles at significantly reduced levels. What we don’t know are vehicle production levels for May through July. The potential exists that supply of new vehicles could be significantly impacted this summer.” Automotive News adds that
Toyota also is limited in the availability of certain paint colors, and while the carmaker is working to match paint supply with vehicle demand, dealers will no longer be able to request paint color changes late in the ordering and allocation process. Toyota’s distribution department also informed dealers that they will allocate only vehicles that have confirmed production or have been loaded onto a vessel, meaning allocations have been sharply curtailed. Toyota will ship vehicles from Japan once every two weeks, with stops at six or more ports on each voyage, according to Bob Carter.

TOYOTA FORKLIFTS
Yes, we realize that the goings-on at Toyota Material Handling U.S.A., Inc. (TMHU), colloquially referred to as Toyota Industrial Equipment is probably of marginal if any interest to followers of the automotive industry. The carmaker’s forklift and lift truck-building division, which falls under the aegis of Toyota Industries Corporation (TICO), has nevertheless made a notable series of contributions to the Japanese recovery efforts, as outlined in the Material Handling & Logistics (MH&L) website. Besides donating approximately $1.2 million to provide relief support for victims and reconstruction assistance, TICO is providing relief supplies, including forklifts, skid steer loaders, food, water, blankets, batteries, gloves and self-care items. Also, TMHU and Toyota Industrial Equipment Mfg., Inc. (TIEM), the U.S. forklift manufacturing plant for Toyota, are matching donations to the American Red Cross made by their associates. This is separate from Toyota Motor Corporation’s donation of $3.75 million to the Japanese Red Cross and TMC’s own donation-matching initiatives.

Fortunately, no damages were reported to any of the Toyota Industries Corporation (TICO) plants in Japan. Although TICO’s Takahama forklift plant was closed from Friday 11 March 11 thru Friday 18 March, production recommenced on Monday 21 March. TICO says it will continue to monitor the situation, however.

Toyota Industrial Equipment Mfg., Inc. (TIEM), located in Columbus, Indiana, produces the majority of Toyota lift trucks sold in North America and continues to operate a normal production schedule. Overtime has been discontinued, as it has been by most if not all overseas automotive assembly plants. Also as is the case with cars and trucks, most North American-assembled forklifts use locally-built parts, but a number of Japanese-sourced components mean that the situation is fluid and bears watching.

SUBARU
Picking up where we left off on our last Kaizen Factor update of Tuesday 22 March, here is how Subaru production currently stands:

Thursday 31 March Limited production of Kei-class mini vehicles resumes.

Wednesday 6 April Limited production of Impreza, Forester and Legacy (the latter for markets outside North America) models resumes at the Gunma plant(s).

Speaking of North America, Automotive News‘ Diana T. Kurylko and Hans Greimel report that Subaru’s Lafayette, Indiana facility that assembles Subaru Legacy, Outback and Tribeca models worked 4-hour long half-shifts on Monday 4 April and Friday 8 April. This translates into daily production of about 293 vehicles on each foreshortened day, versus about 586 vehicles a day on a regular production day. The plant’s 3,550 employees took time off, worked on maintenance projects or received training during the four hour production halt.

DAIHATSU
This Japanese small car specialist, which is 51.2% owned by Toyota, was seemingly less impacted by the Japanese natural disasters than its parent firm. This is understandable, given that its four carmaking facilities are all in southwestern Japan. (For reference, check out the map atop our 12 March 2011 Kaizen Factor story). A number of press releases updating the company’s status have appeared on Daihatsu’s official English-language News page. Here is the pertinent timeline for the carmaker’s production schedule:

Monday 14 March: Vehicle production was halted at all plants of the Daihatsu Group (Daihatsu Motor and Daihatsu Motor Kyushu).

Thursday 17 March: Production of aftermarket/spare parts resumed.

Monday 21 March: Production of parts for overseas production (including knocked-down kit parts) resumed.

Tuesday 22 March: Daihatsu Hijet and Mira production restated at the Oita (Nakatsu) Plant No. 1 of Daihatsu Motor Kyushu, using in-stock parts (parts stored at the plant).

Monday 28 March: Daihatsu Move production restarted at the Shiga (Ryuo) Plant, using in-stock parts (parts stored at the plant).

Monday 18 April: Scheduled production restart for Daihatsu Tanto at the Shiga (Ryuo) Plant, using in-stock parts (parts stored at the plant).

Daihatsu’s other carmaking facilities (the Head Plant at Ikeda in Osaka Prefecture and the Kyoto Plant) remain closed for the time being and into the foreseeable future. Bloomberg estimates that, in March alone, this cost the carmaker an estimated 35,000 production units.

Amidst adversity, however, Daihatsu, like its Toyota parent and other Japanese carmakers, has been doing its share to help in the country’s recovery efforts. Besides a 30-million yen (over US$354,500 at today’s exchange rate) monetary donation to the Japanese Red Cross Society, the company has also donated 100 mini commercial vehicles (Hijet Truck and Hijet Cargo) to local governments and other organizations in the Tohoku area.

Also feeling the effects of Daihatsu’s production slowdown is Malaysian carmaker Perodua, itself 35% owned by Daihatsu. An Associated Press story informs us that Malaysia’s largest carmaker’s production is being disrupted by a shortage of parts from Japan, adding that “adjustments” have been made to ensure inventories last until May, without elaborating, while describing it as a “temporary setback.” Sounds to us like the ubiquitous production slowdowns and curtailment of overtime. Some pundits, such as the Malaysian-based Paul Tan blog strongly suspect that the imminent launch of the next generation of the country’s best-selling car, the Perodua Myvi, will probably be pushed back to the second half of the year. The Myvi, by the way, is a twin to the Daihatsu Boon and the Toyota Passo.

HINO
Japan’s leading producer of medium and heavy-duty diesel trucks and buses has been a part of the Toyota group since 1967, although it wasn’t until 2003 that Hino became a full-fledged subsidiary of Toyota Motor Corporation. Here is a summary of the truckmaker’s current status, as revealed by the Hino Global website’s 2011 News Release page:

Monday 14 March: Production is discontinued at all 3 Japanese facilities (Hino, Hamura and Nitta plants).

Friday 25 March: Bloomberg confirms that factories in Hino and Nitta resumed output of medium- and large-sized trucks. This production is at a reduced rate from normal, with full work stoppages on Wednesday 30 March and Wednesday 6 April.

Monday 18 April: Hino’s light duty-truck Hamura facility, which includes assembly of Toyota’s Land Cruiser Prado and FJ Cruiser models, is expected to restart production at reduced volumes.

Curiously, neither the Hino Trucks USA News page nor the Hino Motors Manufacturing U.S.A. News page address the effects, if any, on U.S. truck assembly.

Hino Motors has also providing material aid to the areas affected by the earthquakes and tsunami, and the Hino Group will also be making a donation of 100 million yen (almost US$1,182,000 at today’s exchange rate) for rebuilding and relief efforts.

ISUZU
What was once Japan’s first carmaker evolved into a force to be reckoned with in the world truck market and an archrival for Hino. Yet, a curious twist of fate brought Isuzu itself into the Toyota fold, as the carmaker acquired a 5.9% share in Isuzu. It may not sound like much, yet it makes Toyota the third-largest shareholder in Isuzu, behind Itochu Corporation and Mitsubishi Corporation. Per the Isuzu Japan 2011 Press Release page, here is the current status of the truckmaker’s operations:

Monday 14 March: Production suspended at both the Fujisawa plant in Kanagawa Prefecture and the Tochigi plant in Tochigi Prefecture.

Monday 28 March: Gradual resumption of aftermarket/spare parts.

Friday 1 April: Gradual resumption of powertrain production.

Tuesday 5 April: Gradual resumption of vehicle and knock-down kit parts production.

A Monday 21 March press release offers a particularly detailed account of the status of Isuzu manufacturing facilities, parts suppliers and Japanese dealers, and the company also announced plans to donate 50 million yen (almost US$591,000 at today’s exchange rate) in aid to areas affected by the earthquakes and tsunami.

Photo Credit: Bloomberg