After a series of earthquakes struck southern Japan and disrupted parts supplies to Toyota, the world’s largest automaker, the company might see its operating profit reduced by about $276.15 million.
Production shifts stopped late last week at Toyota’s Kyushu factories and will extend to other Japan assembly lines in stages throughout this week, Toyota said, as reported by Craig Trudell of Bloomberg.
The earthquakes have have halted some engine and parts production for Aisin Seiki Co., chip manufacturing for Renesas Electronics Corp. and Mitsubishi Electric Corp. and motorcycle output for Honda Motor Co.
The earthquakes will test the business continuity plans that Toyota and its Japanese peers drafted after natural disasters hit the nation’s east coast five years ago and disrupted operations for months. The stakes are high for Toyota because it relies on domestic manufacturing more than its peers. The company and its affiliates made more than 4 million vehicles in Japan last year, 40% of their worldwide output. Nissan Motor Co. and Honda Motor Co.’s shares of auto production from Japan were 17% and 16%.
“Owing to the lessons learned from the Great East Japan Earthquake, the automakers and their suppliers have together built up strong procurement networks for components that can be rapidly restored following disasters,” Nomura Holdings Inc. analysts wrote in a report Monday. “As such, even supposing that production at Japanese automakers is affected for several weeks, we think that they will quickly return to normal and be able to minimize effects” to full-year earnings.
Read more on how the earthquakes will affect a variety of Japanese companies on IndustryWeek.