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Wednesday, Oct. 19, 2011
Industries' relocation to Thailand undone by historic floods
Thailand's worst flooding in 50 years is dealing a dramatic blow to Japanese automobile, precision instrument and other industries because the nation is now an important global production base for numerous manufacturers.
Some makers, whose main production plants are located in Ayutthaya Province, can't foresee when they can reopen their plants, as many facilities are submerged. Other firms with plants in other regions have been forced to halt operations because the floods have severed the supply of parts.
"The flooded area seems to be slowly widening," said Koji Sako, a senior economist in charge of Asian regions at Mizuho Research Institute.
"Moreover, flooded roads snap companies' supply chains," he said.
More than 400 Japanese firms in six industrial districts in Thailand have suffered flooding in factories, and the Thai government issued a flood warning to another 200 Japanese firms, according to a report released Tuesday evening by the Japan External Trade Organization.
There are thousands of Japanese firms across Thailand.
Automakers appear to have taken the biggest hit, as many of their parts suppliers have also been flooded out.
Honda Motor Co. said Tuesday its plant in Malaysia, which has the capacity to produce 40,000 vehicles a year, has started to curb production as parts supplies from Thailand run out.
The automaker has said its auto plant in Ayutthaya, Thailand, which has been halted since Oct. 4, won't reopen until Friday at the earliest. But the reality as of Tuesday was that the halt could last much longer.
"We have no idea how long we should shut down the plant because we can't enter the site," said company spokeswoman Fumika Ishioka.
The plant is its only auto plant in Thailand, and it has the capacity to churn out 240,000 units a year.
Nikon Corp. is also unable to forecast when it will resume production in Thailand, the site of one of the camera maker's main assembly plants.
Nikon produces about 90 percent of its single-lens reflex cameras at its Ayutthaya plant, as well as more than 60 percent of its lenses.
Companies whose plants are not in the Ayutthaya region are also concerned about the situation.
Toyota Motor Corp. has said it will shut down its three assembly plants in southern and eastern Thailand at least until Saturday due to the shortage of parts.
"The scale of the damage remains unclear," spokeswoman Mieko Iwasaki said.
The automaker is currently trying to assess which components are in short supply, she said.
The assembly plants are key to the auto giant's strategy because almost half of the cars it produces in Thailand are for export globally, mainly destined for other member states of the Association of Southeast Asian Nations, as well as the Middle East and Australia.
"The next focus is how long plants will have to suspend operations," Mizuho's Sako said. "Manufacturers usually have inventories for a couple of months. If they have to close plants longer than that, it would hurt their sales."