Published January 7, 2009

Toyota to shut plants for 11 days

World's biggest carmaker sees big drop in sales; move may hit its suppliers, too

By ANTHONY ROWLEY
IN TOKYO

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EMULATING the example set recently by embattled US carmakers, Japanese and world industry leader Toyota announced yesterday that it would stop vehicle production at all of its domestic plants for a total of 11 days during February and March in order to cut bulging inventories as sales plummet.

Hitting the brakes: Toyota's US sales plunged 37% in December, the biggest drop in 25 years and worse than those of rivals General Motors and Ford. Some 40% of the cars Toyota sells in the US are manufactured in Japan

Japan's other two motor giants, Honda and Nissan are expected to follow suit before long.

The move comes on the heels of news that Toyota's US sales crashed by 37 per cent in December, the biggest drop in 25 years and worse than those of rivals General Motors and Ford. Some 40 per cent of the cars Toyota sells in the US are manufactured in Japan.

Toyota disclosed this week that its sales in Japan crumbled by nearly 18 per cent last month and by 7.4 per cent for 2008 as a whole. Meanwhile, overall cars sales in Japan fell to a 34-year low last year.

'We don't know how much further the global economy will slide,' Toyota president Katsuaki Watanabe warned yesterday.

Industrial output as a whole in Japan is collapsing as export demand from all major markets dries up. But in the case of motor vehicles 'output is falling more than twice as fast (as elsewhere) and accounts for around one third of the overall drop', said chief economist Richard Jerram at Macquarie Securities in Tokyo yesterday.

Japan's motor industry has been dealt a double blow by the implosion of demand for cars in its main market, the United States as well as in Japan. The strong yen has meanwhile savaged profits, causing Toyota to announce recently that it will suffer its first operating loss in more than 70 years in the current financial year.

The yen surged to a 13-year high of 87 to the dollar at one point last month although it has weakened somewhat since and is trading now at around 93. Fujio Mitarai, chairman of Japan's biggest business lobby, Nippon Keidanren, said yesterday that 'hopefully' the exchange rate will average 95-105 this year.

Toyota, which before the global economic crisis struck overtook General Motors to become the world's largest producer of motor vehicles, hopes to avoid making full-time workers redundant in Japan but will have to cut 3,000 temporary staff, the firm's president Katsuaki Watanabe said yesterday.

Fears are mounting meanwhile that tens of thousands of smaller Japanese firms in the Nagoya industrial area that supply parts and equipment to Toyota and other Japanese carmakers could face layoffs or even closure, giving a sharp upward push to Japan's 4.1 per cent unemployment rate.

The knock-on effect into supplier firms became apparent yesterday when Japan's Nihon Keizai Shibun reported that Japan's leader tyre maker, Bridgestone Corp, expects its profits for calendar 2009 to fall by 15 per cent to around 100 billion yen (S$1.6 billion).

Toyota plans to eliminate night shift work at 16 of its 75 assembly lines worldwide as global demand for cars continues to implode under the impact of tightening credit and collapsing consumer confidence.

The Japan Automobile Dealers Association announced on Monday that sales of new motor vehicles in Japan (excluding minicars) hit a 34-year-low last year to reach their lowest level since 1974, at the time of the first oil shock. In December, sales crashed by 22.3 per cent.

Toyota said yesterday that it would suspend operations at its 12 plants in Japan for six days in February and another five days in March. The move is expected to reduce production by some 200,000 units, analysts estimated. Toyota last November cut its domestic production forecast by 8.6 per cent to 3.85 million vehicles for the year ending March 31.

Toyota had already announced a three-day production halt this month at its 12 directly operated Japanese plants - four car assembly plants and eight for engines, transmissions and other components.

Despite news of the temporary shutdown in production, Toyota's shares rose one per cent in value yesterday on the Tokyo stock market, where the Nikkei 225 average also continued its recovery, rising by 0.4 per cent to 9,080.84