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Toyota May Be Mired in a Long-Term Slump

Despite product blitz maker faces slow recovery, warns analyst.

by on Oct.10, 2011

The launch of the new 2012 Camry will be critical for Toyota to reverse its current slump.

The next few months will be critical for Toyota.  The maker has finally gotten its global production network up to speed after a slowdown caused by Japan’s March 11 earthquake and tsunami. And with the launch of the new 2012 Camry, Toyota is setting in motion a major product blitz that will bring close to a dozen significant vehicles to market over the next year.

But that may not be enough to pull the maker out of the doldrums, warns a key industry analyst, who believes it could take years for the troubled maker to climb back after a series of problems that began with a series of embarrassing recalls in late 2010.

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“This could take several years, or at least one product cycle, to implement,” cautioned Peter Nesvold, an analyst with Jefferies & Co. in a presentation to investors.”

There’s little doubt Toyota has some series challenges ahead of it.  The maker recalled more than 10 million vehicles last year alone.  And while the majority were connected to concerns about so-called unintended acceleration, the maker also faced problems ranging from steering to braking and excess corrosion that could cause pieces of its minivans to fall off while driving.


Nissan Now Betting U.S. Leaf Production Will Launch on Schedule

Maker still faces challenges from March disaster in Japan.

by on Jul.12, 2011

Nissan's big plant in Smyrna, TN is undergoing extensive rennovations to permit it to produce the new Leaf there, likely starting in late 2012.

U.S. production of the Nissan Leaf is now likely to begin on time, in late 2012, a senior official told TheDetroitBureau.com, in spite of earlier fears the project would be delayed in the wake of the devastating earthquake and tsunami that struck Japan on March 11.

The upbeat pronouncement came just a few weeks after another Nissan official warned that the project could very well be delayed by the disaster.  There are still some challenges to overcome, however, cautioned Bill Krueger, Nissan’s director of procurement and supply chain management, notably including delays in the rigorous training program for the American workers who are expected to produce the complex battery-electric vehicle at the maker’s assembly plant in Smyrna, Tennessee.

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“We’re still targeting to launch Nissan Leaf production and the production of the batteries that will power them at Smyrna late next year,” said Krueger.

Nissan launched production of the Leaf in Japan, late in 2010, and initially maintained an extremely slow pace on the assembly line to help ensure quality.  Even then, the maker discovered an unexpected problem with a small number of early battery cars that required modest tweaks to its controller software.


Japan Auto Crisis Quickly Going Global

Entire Japanese auto industry likely to lose money, key analyst forecasts.

by on Mar.28, 2011

Honda braces for plant closings in North America, which could play havoc with the upcoming launch of the 2012 Civic.

It’s not going to be a good spring for Japanese automakers, the ongoing industry shutdown likely “push all companies into the red” for at least the first half of the year, warns a key industry analysts.  But the impact, which has already struck General Motors, is rapidly spreading through the rest of the automotive world.

In North America and Europe – as well as Japan – supplies of key Japanese-made parts and components are rapidly dwindling.  That has led several Japanese makers, Toyota and Subaru, to pare back U.S. production, as well as to a week-long shutdown at a General Motors truck plant in Louisiana. Two GM plants in Europe are now being impacted, as well, while Volvo is warning its production plans are also in jeopardy.

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“This is the biggest impact ever in the history of the automobile industry,” said Koji Endo, managing director at Advanced Research Japan in Tokyo.

The worst effects, however, are being felt by Japanese makers.  With only a few exceptions, auto assembly operations in the home market remain shut down.  In large part, that’s a direct result of damage from the March 11 earthquake and tsunami which hammered many parts and component plants in the northeast corner of Japan.

As much as 20% of Japanese automotive semi-conductor production may have been lost for months due to the damage to one particular plant, but other silicon-based operations have also suffered at least short-term damage.

Even the production of paint pigments has been impacted, Ford Motor Co. last week forced to temporarily stop taking orders for a number of models in Tuxedo Black and three shades of red.  Chrysler is also taking steps to restrict orders for some colors using Japanese pigments.

“We see the situation as severe but definiable,” said Deutsche Bank analyst Kurt Sanger.  “We assume the impact to production should push all (Japanese car) companies into the red” for the first half of the fiscal year which, for makers like Toyota, Honda and Nissan, begins on April 1.

Collectively, Sanger estimated that Japanese production, initially forecast at 23 million vehicles, will come in about 15% lower.

Barring significant additional setbacks, however, the DB analysis projects the makers will be able to return to profitability during the second half of the fiscal year, beginning on October 1, “and we do not see permanent impairment to corporate value.”

But other analysts have warned that shortages of products and delays in the resumption of production could make Japanese brands more vulnerable to their European and North American competitors.

That’s especially worrisome to Honda, which on Friday issued an advisory to its North American employees that production could soon be interrupted due to parts shortages.  The timing couldn’t be worse considering the upcoming launch of the 2012 Honda Civic.  Long a mainstay in the compact segment, the Civic is now facing tough new competition from rivals like the new Ford Focus, Chevrolet Cruze and Hyundai Elantra.

Honda was the only Japanese automaker to report an earthquake-related death at one of its facilities.  And the Tochigi technical center where that occurred is expected to be out of operation for months, which could delay future product development programs.

Toyota has announced the delay of the Japanese launch of its Prius V, a new model that will share the well-known Prius badge with a current, smaller hybrid.  It is unclear whether Toyota will have to postpone the U.S. roll-out of the Prius V, scheduled for late summer.

Goldman Sachs estimates the shutdown of production has been costing Japanese automakers a collective $200 million a day.  Toyota is suffering a disproportionate share of the impact not only because of its overall size but because it depends more heavily on a Japanese production base than major rivals.

Nissan may, in fact, be able to leverage its North American operations to help restart production back home.  The company is considering the possibility of increasing production of engines at a plant in Decherd, TN, which would be shipped back to Japan to replace output lost when the quake and tsunami damaged a home market engine plant.

Auto Stocks Slammed by Mideast, Japanese Crises; Will Consumers Feel the Heat, too?

Rising pump prices could be followed by shortages, price premiums on some Japanese vehicles.

by on Mar.14, 2011

Over 1,300 Infiniti vehicles were destroyed at one Japanese port. The G25 is shown here, though it's not clear which models were ruined.

Automotive stocks are being battered by twin crises at opposite ends of the world.  Just how long things will continue to worsen – and how bad they will get – is almost impossible to predict, industry analysts are warning.

But investors aren’t the only ones who could soon feel the impact.  The Libyan crisis has already taxed on what some call a “crisis tax” to what U.S. motorists are paying at the pump.  The Japanese earthquake and tsunami will almost certainly have at least some impact on the availability of products from makers like Toyota, Nissan and Honda.  And that could translate into not only waiting lines but higher prices, observers warn.

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It was not a good day for Wall Street, overall, the Dow Jones Industrial Average slipping below 12,000 points for the first time in nearly two months.  But automotive stocks were particularly hard hit by concerns about oil prices, the Japanese disaster – and the threat of a weakened economy.  General Motors, which last week saw shares dip below its $33 IPO price, slipped another 34 cents, to $31.59, at the closing bell.


Quake, Tsunami Deal Blow to Japanese Automakers

Deaths, injuries, damaged plants; makers curb production.

by on Mar.11, 2011

A fireball erupts from an industrial area after the devastating earthquake and tsunami struck Japan.

The massive earthquake that rocked northern Japan has dealt a hammer blow to the Japanese auto industry, which is still piecing together the impact of what is now believed to have been the worst temblor in recorded Japanese history – and the tsunami it spawned — on the country’s industrial base.

With numerous injuries and at least one death, as well as substantial physical damage, automakers large and small say they will be forced to curb production at more than a dozen plants.

“Today’s earthquake halted production at Japanese automakers in their home markets,” noted a report from Standard & Poors.

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Honda reported at least one death at its technical center north of Tokyo.  Company officials have confirmed one Honda associate died at the company’s Tochigi research and development center when a wall collapsed in a cafeteria.

More than 30 other Honda associates were injured in the Tochigi area from collapsing ceilings and other damage, according to the company, which did not provide any information about damage to the sensitive installation itself.  But Honda has halted production in at least two plants.