Honda Halts Production In Thailand For 6 Months

[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.

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.

I can only speak from experience of a large Taiwanese manufacturer with production in Vietnam and China. They would switch to Vietnam tomorrow and are fully aware of "Asian culture". Their Thai assembly plant is near Laem Chabang, so they have not been directly affected by the floods. If they could write off their investment here, they'd be gone.

[roamer]

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.

I can only speak from experience of a large Taiwanese manufacturer with production in Vietnam and China. They would switch to Vietnam tomorrow and are fully aware of "Asian culture". Their Thai assembly plant is near Laem Chabang, so they have not been directly affected by the floods. If they could write off their investment here, they'd be gone.

That could be the true legacy of the floods. I remember seeing figures a year ago showing how Taiwanese investment in Vietnam was massively exceeding that which was going into Thailand. So there is going to be close to zero new investment from sources such as Taiwan, no further expansions. I have no doubt that a lot of foreign investors will be looking for the exit and they sure as hell won't be passing many investors looking for the entrance.

[wintermute]

That could be the true legacy of the floods. I remember seeing figures a year ago showing how Taiwanese investment in Vietnam was massively exceeding that which was going into Thailand. So there is going to be close to zero new investment from sources such as Taiwan, no further expansions. I have no doubt that a lot of foreign investors will be looking for the exit and they sure as hell won't be passing many investors looking for the entrance.

The Philippines did a pretty good job at alienating foreign direct investment through various short term fraud schemes and screwing investors. If Thailand keeps this up they will probably end up in a similar situation. Like I said before profit margins must have been enormous for the Japanese.

[Gonsalviz]

'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.

I am thinking they are thinking about clean up and repairs.

[KeyserSoze01]

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

What are the chances of that ever happening? Between slim and none I would think.

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

Not just in that area, but in all the flood affected areas. The financial losses from the immediate damage is in the billions of baht. The long-term impact through the loss of foreign investments and companies relocating to more stable locations will cost Thailand hundreds of billions in the future.

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

Oh how they larfed. Thaiand could have a state of the art flood defense system, but as long as it's being managed by idiots with political agendas and the backbone of a eel, the result will be the same.

That could be the true legacy of the floods. I remember seeing figures a year ago showing how Taiwanese investment in Vietnam was massively exceeding that which was going into Thailand. So there is going to be close to zero new investment from sources such as Taiwan, no further expansions. I have no doubt that a lot of foreign investors will be looking for the exit and they sure as hell won't be passing many investors looking for the entrance.

The nail in the coffin is that no one in their right mind will underwrite flood insurance policies in Thailand after this event.

.

[kimamey]

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.

Don't these companies have to have factories in Thailand to avoid crippling import duties? If that is the case then moving out may mean losing sales as well.

Someone mentioned the new minimum wage having an negative effect but that was looking like it would be watered down or dropped and the effect of the floods on the economy may just add to this as the government won't want to make Thailand uncompetitive.

Just wondering if the other car companies in Thailand such as Toyota are having similar problems?

[wintermute]

The nail in the coffin is that no one in their right mind will underwrite flood insurance policies in Thailand after this event.

It's going to be interesting if the Thai government gets in on the insurance game because any foreign company's risk will have just doubled. If there is any event that requires an insurance claim the chances of receiving compensation is very weak. The government is so corrupt I can't imagine very many cases in which they'd follow contractual agreements.

[IsaanUSA]

Don't these companies have to have factories in Thailand to avoid crippling import duties?

Very good question. Anybody know the answer here?

[TongueThaied]

Honda is NOT stupid. This has been devastating for them as it has not only shut production of Honda in Thailand, but the US, Canada and the Philippines as well. They cannot afford to let this happen again, and it WILL happen again if the factory stays put. All the machines in the Thai plant are already destroyed. My money says the factory will move. This is why it will take six months to sort it out. I’m offering two to one odds. Five dollars will get you ten. Any takers?

[TongueThaied]

Don't these companies have to have factories in Thailand to avoid crippling import duties?

Very good question. Anybody know the answer here?

Yes, absolutely. But they can certainly move to higher ground. The Bangkok area is convenient as it is the major port, but Honda is not wedded to it. They would do just fine anywhere along the rail line.

[LTGTR]

MRO=Maintenances,Repair,Overhaul.

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.

[khaowong1]

'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.

Ha ha ha :-) Yes we all believe that. And Thailand will put a man on the moon this year.

[catmac]

Don't these companies have to have factories in Thailand to avoid crippling import duties?

Very good question. Anybody know the answer here?

In theory, the ASEAN free trade agreements should cover that. I say in theory, because the vested interests in Thailand will do everything in their power to subvert free trade that might threaten their pockets - remember the farce of the big Thai brewers demanding that a special "health tax" should be imposed on foreign beers coming in free of import duty?

[swisstouristpattaya]

They need to stay near the sea as part are imported by boat. Then transfer by truck so just forget high altitude industries or pay 30 percent more for your honda.

Leave Thailand and pay 50 percent more due to import tax.

Rebuild same spot and risk flooding again?

If they stay in Thailand or leave, expect increase price in honda. Go buy now cars . Tomorrow it will be very expensive to get a new car and price will increase everywhere to cover lost costs.

U got my point...

[catmac]

Not just Honda having trouble, seems Toyota is also floundering....

http://www.bbc.co.uk/news/business-15587229

Maybe the end of manufacturing in Thailand, all to save the face of the Governor of BKK!

[sparebox2]

I just call Honda to ask if I were to put in an order now for a Honda City, when will I get the delivery?

The answer is: middle of next year if I am lucky.

[puntmeister]

Don't these companies have to have factories in Thailand to avoid crippling import duties?

Very good question. Anybody know the answer here?

Yes, absolutely. But they can certainly move to higher ground. The Bangkok area is convenient as it is the major port, but Honda is not wedded to it. They would do just fine anywhere along the rail line.

They can relocate, and they can also downsize.

To continue to supply the domestic market - yes, they will need to have manufacturing capacity in Thailand, due to the import duties. However, they won't use Thailand as a source of parts anymore - ie, no exporting.

I agree with previous posts - a shift towards Vietnam is inevitable (already underway). Its all about human resources. The Vietnamese are generally more intelligent, harder working, and more reliable. And, for now, wages in Vietnam are much lower than Thailand. The lack of development in Vietnam is a result of misguided communist policies - once they can get over that, their productivity will skyrocket. Just like China.

Thailand, on the other hand, has reached its peak. Things got as good as they'll ever get here. And, unfortunately, due to natural disasters, things are likely to get worse.

[wintermute]

I agree with previous posts - a shift towards Vietnam is inevitable (already underway). Its all about human resources. The Vietnamese are generally more intelligent, harder working, and more reliable. And, for now, wages in Vietnam are much lower than Thailand. The lack of development in Vietnam is a result of misguided communist policies - once they can get over that, their productivity will skyrocket. Just like China.

Thailand, on the other hand, has reached its peak. Things got as good as they'll ever get here. And, unfortunately, due to natural disasters, things are likely to get worse.

Vietnam has a lot of the similar problems that Thailand has. The government there is just as corrupt, the infrastructure is lacking, and the people aren't necessarily as specialized to handle the heavy industries located in Thailand. In 20 years I can see Vietnam beating out Thailand though.

20 years from now Thailand's position looks fairly grim. I foresee greater political upheavals once certain dominant figurehead(s) pass on. The natural disaster stuff is just additional issues that need to be addressed but won't.

[gerry53]

I just call Honda to ask if I were to put in an order now for a Honda City, when will I get the delivery?

The answer is: middle of next year if I am lucky.

My new Honda City was supposed it be delivered before Nov. 1st - it did not arrive needless to say. Does anyone have an updated version of when they plan to put the Honda plant into production mode? I have phoned the dealer and Honda Thailand and have been assured the old orders will be filled first but they refuse to give any dates.