UPDATE 2-Toyota, other major Japanese firms hit by quake damage, supply disruptions – Reuters

Posted: Sunday, April 17, 2016

* Supply disruption to halt most Toyota assembly plants in
Japan

* Toyota supplier Aisin Seiki to switch production elsewhere

* Output still suspended at Honda, Sony factories in
Kumamoto area

* Renesas says some equipment damaged at Kumamoto plant

* Nissan to resume operations at plants in region

(Recasts, adds comment throughout)

By Naomi Tajitsu and Makiko Yamazaki

TOKYO, April 17 Toyota Motor Corp, the
world’s biggest-selling automaker, said on Sunday it would
suspend much of its production at plants across Japan this week
after earthquakes in the country’s south led to a shortage of
parts, while some other manufacturers extended stoppages due to
damage to factories.

The earthquakes on Thursday and Saturday, which killed at
least 41 people, reflected the vulnerability of Japanese
companies to supply chain disruptions caused by natural
disasters, and also highlighted the “just in time” philosophy
pioneered by Toyota and followed by many others.

Companies had made efforts to address these problems after a
2011 earthquake and tsunami, which led to a nuclear disaster and
nearly 20,000 deaths, badly dented output. The way that
companies deal with the impact of the latest quakes will likely
show how robust these changes have been.

Honda Motor Co. said it would keep production
suspended at its motorcycle plant near the quake-hit city of
Kumamoto in southern Japan through Friday, though Nissan Motor
Co said it would resume operations at its plants north
of the epicentre from Monday.

Electronics giant Sony Corp said production would
remain halted at its image sensor plant in Kumamoto, as the
electronics giant assessed structural and equipment damage.
But the company said it had resumed full operations at its
plants in nearby Nagasaki and Oita which also produce the
sensors – used in smartphone cameras, including Apple Inc’s
iPhone.

Also on Sunday, semiconductor manufacturer Renesas
Electronics Corp confirmed it had sustained damage to
some equipment at its plant in Kumamoto which produces
microcontroller chips for automobiles. Having suspended
operations following the first earthquake on Thursday, the
chipmaker said it would assess damage at the entire facility
before deciding when to resume production.

STICKING TO “LEAN” PRODUCTION

Toyota said it would suspend operations in stages at most of
its vehicle assembly plants across Japan for roughly a week
beginning Monday as it was unable to source parts from some of
its suppliers including affiliate Aisin Seiki.

Earlier this year, Toyota offered limited details about what
changes it made to its production system after the 2011 quake
exposed the vulnerability of the “just in time” system, which
allows companies to operate without big and costly inventories
and instead receive small quantities of parts from suppliers
only when needed.

Japanese supply analysts have said that other domestic
suppliers have stuck to the core ideas of “lean” production,
although they have made moves to make it more resilient to
natural disasters.

Since 2011, Toyota, which spent weeks at the time
identifying how its suppliers had been affected by the quake,
and Nissan have both developed supply chain databases which
offer a detailed view of their supplier base to identify how
their supply chain may be disrupted during emergencies.

Aisin Seiki, whose plants in Kumamoto sustained damage from
the quake, said it would make the parts produced in the
quake-hit city in other facilities at home and abroad. The parts
include sun roofs, door handles, semiconductors and other
products.

“If there’s a part we make in Kumamoto which is identical to
a part we make at the Aisin headquarters in Aichi (in central
Japan) we’ll shift production there,” an Aisin spokesman said.

Aisin stressed that it had kept to the “just in time”
system, and hadn’t built up big inventories, but instead did
have robust plans for shifting production elsewhere.

“As a Toyota-affiliated company, we don’t hold significant
inventory,” the spokesman said. “So as a rule we wouldn’t have
been holding inventories to last, say, one week or a month.”

DIFFICULT START TO YEAR

The latest stoppage is Toyota’s second in Japan this year,
after production came to a halt for a week in February when a
fire at an affiliate’s steel plant resulted in a gap in supplies
and drove the car company’s global production down around 4
percent on an annualised basis in the first two months of 2016.

So far this year, domestic production has accounted for
roughly 40 percent of Toyota’s global output, with nearly half
of all its vehicles produced in Japan exported overseas.

Renesas, which suffered significant damage at its
semiconductor plants in northeastern Japan following the 2011
quake, leading to months of delays to the global supply chain
for automakers, previously said it had not been stocking extra
inventory for risk management purposes since that disaster.

However, it has begun to standardize more parts across
various models to enable in house production at alternative
plants during emergencies.

(Editing by Lincoln Feast and Martin Howell)

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