Toyota slashes output amid chip crunch, COVID-19 resurgence

Toyota Motor Corporation said it will slash global production for September by 40% from its previous plan, becoming the last major automaker to cut output due to a global chip crunch, but it maintained its annual sales and production targets.

Toyota’s success in navigating the chip shortage better than rivals has come down to its larger stockpile of chips under a business continuity plan adopted after the 2011 earthquake and the Fukushima nuclear disaster.

The world’s largest automaker by sales volumes reiterated on Thursday, August 19, its global production target of 9.3 million vehicles for the year ending in March, as well as its plan to sell 8.7 million cars in the period.

“The 9.3-million global production plan takes into account certain risks,” executive Kazunari Kumakura told reporters. “We want to achieve the numbers.”

Toyota said the September cuts included 14 factories in Japan and overseas plants, and that the company would reduce its planned global production that month by around 360,000 vehicles.

Of these, 140,000 will be at Japanese plants, with the rest in the United States, China, Europe, and other Asian countries.

Carmakers worldwide have been cutting production due to the months-long chip shortage, but a resurgence in COVID-19 cases in Japan, the Philippines, Thailand, Vietnam, and Malaysia – home to auto factories and chip plants – have led to stricter curbs and compounded the crisis.

Germany’s Volkswagen said on Thursday it may need to cut production further and that it expected the supply of chips in the third quarter to be “very volatile and tight.”

Ford Motor Company said Wednesday, August 18, it will temporarily shut its Kansas City assembly plant that builds its best-selling F-150 pickup truck due to a semiconductor-related part shortage as a result of rising cases in Malaysia.

Earlier this month, Toyota had flagged an unpredictable business environment due to fresh COVID-19 cases in emerging economies, the semiconductor shortage, and soaring material prices.

Toyota shares closed down 4.4% in their biggest daily drop since December 2018, pulling the benchmark Nikkei average to a seven-month low.

The carmaker had already halted assembly lines at some Japanese factories between late July and early August, including its Tahara plant, due to a surge in infections in Vietnam which had constrained the supply of parts, the Nikkei reported earlier.

A person familiar with the matter told Reuters this month that Toyota had also suspended production at one assembly line in Guangzhou, China, which it operates with its Chinese joint-venture partner Guangzhou Automobile Group Company Ltd.

In Thailand too, Toyota suspended production last month at three factories due to a pandemic-related parts shortage. – Rappler.com