Toyota Motor Corp., hit hard by last month’s Japanese earthquake, says it will take at least until November for production to return to normal – overseas and at home – but that factory suspensions have bottomed out and output will start rebounding this summer.
The announcement makes the world’s biggest automaker the first to publicly forecast a return to pre-quake levels and offers a peek at how long it may take other Japan carmakers to recover.
Toyota President Akio Toyoda said today he outlined the timeframe – despite its being long-range and vague – to help dealers with planning. Until now, they have been hamstrung in pitching their products and handling customers because of looming uncertainty about inventories.
“By telling dealers the timing of the recovery, they can have a better conversation with their customers,” Toyoda said at a news conference. “Dealers right now cannot talk to their customers about delivery timing. They can’t talk about specifics. Sales people are having a difficult time.”
First Japan, then U.S.
Toyota expects output overseas and in Japan to return to pre-quake levels in November or December. In Japan, output that currently hovers around 50 percent of the normal rate will start increasing in July as the final kinks in the supply chain get worked out.
Factories in other countries will begin ramping up production from current levels in August.
Atsushi Niimi, executive vice president for global manufacturing, said U.S. production levels – expected to be around 30 percent normal – will inch along at that rate until August.
“I think that’s the lowest production will drop,” Niimi said.
Toyota recently has announced several production cuts for plants in the United States. Assembly plants there will operate for only three days a week. And when they are running, they will work at only half the normal pace. That brings total output to about 30 percent of pre-quake levels because the plants will lie completely idle on both Mondays and Fridays.
Fragile recovery
Like other Japanese automakers, Toyota has been suspending production amid global parts shortages triggered by the March 11 earthquake that hammered Japan’s supply chain. Toyota also announced this week that it would slash utilization of its plants in China to as low as 30 percent.
It has made other production cuts in Europe.
Toyoda stressed that his comeback plan is still very fragile.
“Just last night in the area around Tokyo, we had another aftershock,” Toyoda said. “Because of such things, it can reverse the progress being made. So it is difficult to read what will happen.”
He wouldn’t speculate on how it would impact earnings or about how many units of production would be lost globally, with plants limping along for months to come.
Through the end of April alone, Toyota expects to lose 500,000 units globally.
Shinichi Sasaki, executive vice president in charge of purchasing, said models that share many commonized parts will be first returning to normal production.
Dealer support
Toyoda said the company is considering support to its dealers as sales sag. In Japan, that will entail help in seeking public support or in attracting after-service repair work.
He didn’t outline any plans for dealers overseas. Spokesman Masami Doi said actions to support U.S. dealers would be handled through its local sales arm, Toyota Motor Sales U.S.A.
“The best thing we can do for those dealers is supply cars as quickly as possible,” Toyoda said.
Toyota will also tweak procurement to better guard against supply shocks, Sasaki said. While it will stick with a just-in-time approach of keeping low parts inventories, it will spread risk better.
That will include moving more parts production overseas – especially lower tier suppliers, he said. That way, U.S. parts plants won’t be as reliant on imported subcomponents.
“We have to consider being able to procure the entire part locally,” Sasaki said. “We would like to ask our suppliers to consider setting up shop overseas.”
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