Wednesday, October 26, 2011

Thailand's flood sends no immediate impacts on Japanese automakers: S&P

Thailand's flood sends no immediate impacts on Japanese automakers: S&P

There is no immediate impact on ratings on Japanese automakers and suppliers after Thailand's floods disrupted their supply chains, said Standard & Poor's Ratings Services.


The floods have forced companies including Toyota Motor Corp, Honda Motor Co Ltd, Nissan Motor Co Ltd, and Mitsubishi Motors Corpto temporarily suspend operations at their plants in Thailand. The country is the largest manufacturing base in Southeast Asia for the Japanese automobile industry. In some cases, the supply chain disruptions are also affecting vehicle production outside Thailand. Toyota just announced that the production capacity in Japan would be cut by 10 per cent due to shortages of components. Coupled with a cut in overtime production for at least 5 days, this will cut the output by 1,200 cars or a total of 6,000 unit.

S&P said in a statement released today that Thailand’s severe floods could slow recovery in the profitability of Japanese automakers and suppliers, after the Great East Japan Earthquake in March caused production cuts in the first half of the current fiscal year ending March 2012.

"However, we currently do not expect the impact of the floods to be as severe and prolonged as the production cuts that we saw after the earthquake. This is because Thai-made parts and vehicles are generally less difficult to replace than those made in other regions. Therefore, we do not expect the floods to cause protracted pressure on Japanese automakers’ profitability and to have a long-term impact on their market positions. Nevertheless, if the floods eventually result in severe and extended production cuts that lead us to believe that they will likely impair the automakers’ profitability and market positions in a serious manner over the long run, we may consider negative rating actions."
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