Toyota to suspend Japanese production

Toyota will suspend production at its Japanese plants for 11 days in February and March following plunging US sales.

Matt Brogan

07:3307 January 2009

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With car yards across the US full of unsold cars, and a 37-percent drop in sales for December, it seems the manufacturer has been left with little choice.

The sales slump is Toyota's biggest in more than 25 years, and in the US at least, is worse than the declines seen at rivals General Motors and Ford.

"I never expected the crisis to spread this fast and leave this deep a scar," said Toyota President Katsuaki Watanabe today.

Toyota had already announced a three-day production stoppage for this month at its 12 directly operated Japanese plants (four car assembly plants and eight for engines, transmissions and other components).

A sweeping suspension of domestic production is almost unprecedented with the last halt in production, back in 1993, only lasting a day following a rise in the Yen seeing a sales crimp off shore.

Japanese-built cars make up around 40-percent of Toyota's volume in the United States, where industry wide sales dropped 18-percent last year to their lowest levels since 1992.

But it's not just Toyota who are suffering at home in Japan. Rivals Honda and Nissan have also cut output plans by at least 200,000 vehicles for the year ending March 31, and analysts expect further adjustments before then.

Toyota does not disclose the number of vehicles affected by production stoppages. Together, the four Japanese assembly plants built an average 130,000 vehicles a month in 2007, according to the latest available data.

"For the stock market to re-evaluate this sector, there are two prerequisites: the end of negative news flow and an outlook for a return to the black in the next business year," Merrill Lynch auto analyst Koichi Sugimoto wrote in a client note."In that respect, we'd have to say the (US sales) results were disappointing."

On Monday, data showed Toyota's Japan sales slid 18-percent in December, and were down 7.4-percent for 2008. Auto industry executives have warned that 2009 will be difficult and unpredictable.

"I'd like to believe that we'll hit bottom (for the US economy) some time this year," Toyota's Watanabe said. "But if you look at the automobile market now, it's very, very tough. We need to proceed with the assumption that this situation could continue."

Toyota plans to turn the 11 days in February and March into a paid company holiday, a spokesman said.