Bloomberg News - Toyota Motor Corp. (7203) told U.S. dealers that assembly disruptions triggered by last month's record earthquake and tsunami in Japan may thin supplies of vehicles into the third quarter.
The world's largest automaker will build vehicles at "significantly reduced levels," Bob Carter, group vice president of U.S. sales, said in a memorandum to dealers. While Toyota, Honda Motor Co. and Nissan Motor Co. reported mostly minor damage at Japanese plants from the March 11 disaster, all three cut output in Japan and abroad as they rebuild stockpiles of parts from suppliers whose operations were disrupted.
Toyota, which estimates that North America generates about 60 percent of its operating profit, said last week it would suspend production at auto, engine and parts plants in the region for five days this month because of a shortage of Japan- made components. The company plans to restart all plants in Japan by April 18 at half of their capacity, it said last week.
"What we don't know are vehicle production levels for May through July," Carter said in the memo. "The potential exists that supply of new vehicles could be significantly impacted this summer."
Toyota probably has a sufficient supply of vehicles until the middle of May, said Jesse Toprak, an industry analyst at TrueCar.com, a website based in Santa Monica, California, that tracks auto market trends.
Prius Availability
"Beyond that, cars made solely in Japan and that get exceptionally high mileage -- the Prius, for example -- will have very limited availability," Toprak said.
Toyota fell 1.5 percent to 3,210 yen as of 9:02 a.m. in Tokyo trading. The shares have declined 12 percent since March 10, the day before the earthquake.
Ford Motor Co. (F) may also halt production of some models in Asia starting in the last week of April, because of parts shortages caused by last month's 9-magnitude earthquake, the company said in a regulatory filing yesterday. The second- largest U.S. automaker closed a factory in Kentucky and Belgium last week due to earthquake-related parts shortages.
The possible shutdown of Asian plants wouldn't have a "material impact" on overall results, Dearborn, Michigan-based Ford said in the filing.
Ford fell 47 cents, or 3.1 percent, to $14.86 yesterday in New York Stock Exchange composite trading.
Resuming Output
Toyota may lose production of 35,000 cars and light trucks at North American factories between March 11 and April 25 because of production cutbacks, Shiori Hashimoto, a company spokeswoman in Tokyo, said yesterday. Mike Goss, a spokesman for Toyota's manufacturing unit in Erlanger, Kentucky, declined to elaborate on assembly plans beyond the April 8 announcement.
"Output reduction in Japan and overseas will most likely continue until September," said Kohei Takahashi, an analyst at JPMorgan Chase & Co. (JPM) in Tokyo. "Demand in the overseas markets is greater than that in the domestic market, so automakers will prioritize resuming output at their overseas plants."
A decision on whether North American production cuts need to be extended will be made later this month, Carter said, without elaborating.
Toyota has an inventory of more than 300,000 new vehicles for sale in the U.S., more than it did after the U.S. government's "cash for clunkers" incentive program in 2009, Carter said in the memo.
"We remain confident about April sales," he said.
Paint Colors
Along with reduced vehicle inventory, Toyota also expects some paint colors to be in limited supply because of damage sustained by a chemical maker in Japan, Carter said.
Toyota's distribution department will work with the North American engineering and production unit "to change exterior colors on affected vehicles to match paint supply and keep the production lines moving," Carter said, without elaborating.
Citigroup Inc. analyst Noriyuki Matsushima downgraded Japan's automobile sector to "sell" last week, citing the possibility that output cuts will last beyond April. The report also said the industry hasn't addressed the effect on earnings from possible electricity shortages stemming from damage to a nuclear-power plant in Fukushima, Japan.
Toyota's U.S. sales unit is based in Torrance, California. The company's memo to dealers was reported earlier by the Wall Street Journal.
