Honda Halts Production In Thailand For 6 Months

[webfact]

Honda Halts Production in Thailand for 6 Months

Japanese automaker Honda Motor Company has already suspended production for half a month, after its manufacturing plant in Ayutthaya's Rojana Industrial Estate was ravaged by the ongoing inundation.

Honda Motor expects the flood crisis may force the company to halt production in Thailand for another six months, which would impact the number of global automobile productions by approximately 3 percent or the equivalent of 100,000 units.

Production in various countries, including Malaysia and Indonesia, is also being suspended due to auto parts shortages.

Honda is the third largest Japanese automaker in Thailand.

It has had a production base in the country for over 47 years and employs 6,000 workers. Currently, its factory in Ayutthaya Province is underwater.

Honda expects that it will spend many months before resuming full production, saying all the machines left stranded underwater are ruined.

Last Monday, Honda revealed its second quarter financial results that the company's profit dropped by 61 percent due to a deadly earthquake in Japan combined with Thailand's worst flood in decades.

Despite its losses, Honda still forwarded a 100 million baht donation to the Thai Red Cross Society for the flood relief effort earlier.

-- Tan Network 2011-11-03

[submaniac]

oh crap. the shortages of Hondas coincides with the government rebates on cars.

[cloudhopper]

'Honda Motor expects the flood crisis may force the company to halt production in Thailand for another six months'

Someone in charge there has a realistic view.

[pimay11]

I think there may be more to this than Honda is telling.

[eljeque]

"Despite its losses, Honda still forwarded a 100 million baht donation to the Thai Red Cross Society for the flood relief effort earlier."

Makes me happy to own a Honda, or a few of them, even if they are only motorbikes.

[Moruya]

'Honda Motor expects the flood crisis may force the company to halt production in Thailand for another six months'

Someone in charge there has a realistic view.

Surely not! Captain Plodprasert and Miss Yingluck said it will all be over in 10 days.

[zakk9]

I think there may be more to this than Honda is telling.

That would seem obvious. In addition to the 6,000 Honda employees, there are probably at least an equal number of employees at parts suppliers and other sub-contractors. Add to that all those selling services and products to those people, and we have a complete town out of work. Honda's factories in Malaysia and Indonesia obviously can't wait for the water to drain from Ayuttaya, so parts will be sourced elsewhere, temporarily or permanently.

Now, multiply this with the number of large production units affected by the flood, and we have a rather scary scenario.

[LuckyLew]

I just saw in the news that Thai Gov;t official saying / claiming that industrial

parks in Ayyattuya will be up and running in one month

Honda says that are shutting down for 6 months

At least one group of people has more reasonable expectations

IMO : Ayyathuya will still be flooded in 1 month

Would be so nice if current Gov't could make honest and realistic statements

[DP25]

If the rest of the factories in the area are shut down for 6 months as well it will be absolutely devastating for Thailand

[pimay11]

I think there may be more to this than Honda is telling.

That would seem obvious. In addition to the 6,000 Honda employees, there are probably at least an equal number of employees at parts suppliers and other sub-contractors. Add to that all those selling services and products to those people, and we have a complete town out of work. Honda's factories in Malaysia and Indonesia obviously can't wait for the water to drain from Ayuttaya, so parts will be sourced elsewhere, temporarily or permanently.

Now, multiply this with the number of large production units affected by the flood, and we have a rather scary scenario.

The closing of the plant in Thailand has resulted in Honda US and Canada reducing production by 50%. Now the plant in Thaland will be closed for six months resulting in multiple millions of losses in Honda sales. Honda is not stupid by any means. Considering that the same thing may happen next year or the next or the next which is a real possibility they have to be considering alternatives.

No wonder the PM is jumping through hoops trying to assure them "this will never happen again".

[MoonRiverOasis]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

[aguy30]

I can't understand why any business would rebuild on exactly the same site when this disaster could repeat many times in the years to come. I suspect that many companies are seriously looking at eastern Thailand or even other countries instead of rebuilding in a flooded location. Ayuttaya and other flooded industrial areas around Bangkok may be destined to become industrial ghost towns.

The magnitude of this disaster is grossly under estimated (or at least publicly expressed) by this government. I would guess that Thailand has now been moved back 20 years in it's industrial development.

Edited November 3, 2011 by aguy30

[wintermute]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

What are you babbling on about? Honda vehicles are regularly on the top 10 lists on Edmunds and other consumer polls. The company is certainly in no financial danger. It controls massive market share in the U.S.

http://www.edmunds.com/car-reviews/consumers-most-popular.html

http://www.edmunds.com/car-reviews/top-10/top-10-best-selling-vehicles.html

[whybother]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

I thought Honda only made motorcycles and parts for cars in Thailand.

[KKvampire]

Alot of people around ayutthaya rojana and beyond in for a tough time and thai government has to covince and assure companies to stay more importantly that it wont happen again

[ratcatcher]

Alot of people around ayutthaya rojana and beyond in for a tough time and thai government has to covince and assure companies to stay more importantly that it wont happen again

You know that the last four words in your post are impossible to say (honestly, that is.).

[MoonRiverOasis]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

What are you babbling on about? Honda vehicles are regularly on the top 10 lists on Edmunds and other consumer polls. The company is certainly in no financial danger. It controls massive market share in the U.S.

http://www.edmunds.c...st-popular.html

http://www.edmunds.c...g-vehicles.html

Oh, I'm just babbling, yes - I have no insight into the motor industry at all The curtains statement was directed at Thai operations - the US market can support brands/models Asia-pac markets couldn't dream of...

Edited November 3, 2011 by MoonRiverOasis

[webfact]

Thai floods force Honda Philippines to close

MANILA, November 3, 2011 (AFP) - Japanese automaker Honda has suspended production at its Philippine plant because suppliers in flooded Thailand are unable to deliver parts, a company official said Thursday.

Honda Philippines shut its factory this week and will not re-open until it can find alternative suppliers to those in Thailand, human resources manager Joseph Tacorda said.

"At this point, we are still waiting for materials to come in from other manufacturing centres of Honda because Thailand has been cut off," Tacorda told AFP, adding it was not yet clear when fresh supplies would be delivered.

Honda Philippines, a subsidiary of Honda in Japan, assembles and distributes five vehicles locally, including the CR-V sport utility vehicle and the Accord coupe, according to the company's website.

Honda was the third biggest seller of cars in the Philippines in the first eight months of the year with 9,062 units sold, or 9.7 percent of the market, according to the local auto industry association.

Three months of unusually heavy rains and a failure to release enough water from dams early in the monsoon season have caused Thailand's worst floods in half a century, killing 437 people and submerging large parts of the country.

Honda had already announced on Monday that it would slash production at its North America plants by 50 percent this week because of the supply problems in Thailand.

-- (c) Copyright AFP 2011-11-03

[KKvampire]

Alot of people around ayutthaya rojana and beyond in for a tough time and thai government has to covince and assure companies to stay more importantly that it wont happen again

You know that the last four words in your post are impossible to say (honestly, that is.).

Why is that? It's impossible to say that"flooding in that part of Thailand" wont happen again , but there will be a good Flood defence system . I am sure the government will be doing all it can to assure a major employer there will be protection for its huge investment or else it would be "Bye Bye Thailand"

[Kalbo]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

I thought Honda only made motorcycles and parts for cars in Thailand.

Nope. They have , or rather had a large facility in Rojana, that was capable of knocking out approx 280,000 cars a year.

Most of the motorcycles and parts manufacture takes place at their Honda EGAS facility in the Lat Krabang estate, which is also looking very dodgy at the moment

[Gweiloman]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

What are you babbling on about? Honda vehicles are regularly on the top 10 lists on Edmunds and other consumer polls. The company is certainly in no financial danger. It controls massive market share in the U.S.

http://www.edmunds.c...st-popular.html

http://www.edmunds.c...g-vehicles.html

Hahaha. I think you have no idea who you are taking on here. Let's hope MRO goes easy on you.

[Gweiloman]

This could quite possibly be curtains for Honda..

They've been under massive financial struggles for the past 3 years. The new Civic has been universally panned in the US (a critical model for them in that market), the Jazz has been losing sales hand over fist in every global market, the City remains popular only in Thailand (where they can't sell any now). The Accord is dated and is bottom of it's segment in virtually every market.

Not to mention that with this announcement, they've just lost practically their entire sales force.

How do you mean, they've lost their entire sales force? As in, they will join other automobile manufacturers?

[MoonRiverOasis]

How do you mean, they've lost their entire sales force? As in, they will join other automobile manufacturers?

The sales reps you see in new car dealerships are paid a fairly meagre base salary, and most are totally dependant on commissions to make turning up to work worthwhile. Then there's the fact that dealer principles just arent' going to be able to justify paying base to their current sales staff levels when there's virtually no sales to be had.

My phone has been running hot from friends at Honda asking advice on where to go next. Most are hopeful they can move to Toyota of course, but friends there are telling me a good percentage of sales staff are starting to take time off as well, due to lack of products to sell..

[tommyboy928]

oh crap. the shortages of Hondas coincides with the government rebates on cars.

Was it not many cars under water on the parking there ?

[puntmeister]

Alot of people around ayutthaya rojana and beyond in for a tough time and thai government has to covince and assure companies to stay more importantly that it wont happen again

You know that the last four words in your post are impossible to say (honestly, that is.).

Why is that? It's impossible to say that"flooding in that part of Thailand" wont happen again , but there will be a good Flood defence system . I am sure the government will be doing all it can to assure a major employer there will be protection for its huge investment or else it would be "Bye Bye Thailand"

I personally wouldn't be so sure the government will be doing all it can to assure employers to stay. That's not a snide at the current government - that's a snide at all Thai governments. I think the risk, pointed out above, of factories either moving elsewhere in Thailand, or out of Thailand altogether, is very real.

Floods, as millions of Thais can tell you based on first hand experience, are truly devastating. Consider the huge losses from damaged equipment, the extended downtime, and the messy clean-up. Also consider - heavy rains are a recurring annual event in Thailand, with the very real prospect that they'll get progressively heavier over time (due to global climate change). Given the overall ineffectiveness of Thai government, if I were the decision maker regarding the fate of one of these factories - I know what I would do.

[puntmeister]

Alot of people around ayutthaya rojana and beyond in for a tough time and thai government has to covince and assure companies to stay more importantly that it wont happen again

You know that the last four words in your post are impossible to say (honestly, that is.).

Why is that? It's impossible to say that"flooding in that part of Thailand" wont happen again , but there will be a good Flood defence system . I am sure the government will be doing all it can to assure a major employer there will be protection for its huge investment or else it would be "Bye Bye Thailand"

I personally wouldn't be so sure the government will be doing all it can to assure employers to stay. That's not a snide at the current government - that's a snide at all Thai governments. I think the risk, pointed out above, of factories either moving elsewhere in Thailand, or out of Thailand altogether, is very real.

Floods, as millions of Thais can tell you based on first hand experience, are truly devastating. Consider the huge losses from damaged equipment, the extended downtime, and the messy clean-up. Also consider - heavy rains are a recurring annual event in Thailand, with the very real prospect that they'll get progressively heavier over time (due to global climate change). Given the overall ineffectiveness of Thai government, if I were the decision maker regarding the fate of one of these factories - I know what I would do.

Also consider - it would take a gargantuan effort - billions of dollars and years of planning and implementation - to fully mitigate future heavy rains such that unwanted flooding doesn't reoccur. It would be a steep challenge for any government (even the US failed with New Orleans). I just don't think the Thai government (this one or any other, past, present, or future) is up to the challenge.

[IsaanUSA]

I don't know anything about manufacturing, but if the companies are looking at other places to acquire parts, then why not invest in the expansion of those places instead of rebuilding the factories that have been flooded in Thailand? Not to mention the minimum wage increase which has to have some effect on those companies.

The other places that can make those parts should actively be advertising their services to Japan, which I'm sure they already are.

[roamer]

I don't know anything about manufacturing, but if the companies are looking at other places to acquire parts, then why not invest in the expansion of those places instead of rebuilding the factories that have been flooded in Thailand? Not to mention the minimum wage increase which has to have some effect on those companies.

The other places that can make those parts should actively be advertising their services to Japan, which I'm sure they already are.

A lot of those factories won't be rebuilt, simple as that. Insurance is going to be either unobtainable or unaffordable in the future. Government can proclaim new water management plans all they want, insurers will want to see the reality not the promise.

I think there will soon be a lot of empty industrial units in Thailand, wet or dry won't make much difference.

[BarryM]

There's plenty of investors in Thailand who did not fully understand the "cultural differences" when they signed on the dotted line; the lack of level playing field, HR limitations and sheer corruption that is endemic in the country. Now their net asset value here is written down to practically zero, don't be surprised to see many of them relocating to neighbouring countries.

[wintermute]

There's plenty of investors in Thailand who did not fully understand the "cultural differences" when they signed on the dotted line; the lack of level playing field, HR limitations and sheer corruption that is endemic in the country. Now their net asset value here is written down to practically zero, don't be surprised to see many of them relocating to neighbouring countries.

Japanese investors aren't stupid though. They generally don't commit unless there's huge profit margins involved. I'm sure they are well aware of how corruption works in SE Asia probably much better than European investors.