Parts Shortages Continue to Hamper Toyota's Production Efforts Worldwide

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Researched by Industrial Info Resources (Sugar Land, Texas)--The last 18 months have not been kind to Toyota Motor Corporation (NYSE:TM) (Tokyo, Japan). After taking firm control of the top worldwide automobile sales slot, Toyota was rocked by recall after recall due to faulty brakes on many of its vehicles last year. Things got so bad that congressional hearings took place in the U.S. to address the problems. Just when Toyota thought that the fallout from those problems was dying down, a massive earthquake and related tsunami rocked Japan, causing Toyota to halt almost all of its vehicle production. More than a month after that disaster, shortages of approximately 150 different parts continue to hamper Toyota's production efforts worldwide as the automaker struggles to get operations back online full-time.

Toyota restarted production at its Japanese plants earlier this week, albeit operating at half-production due to the parts situation. The automaker intends to continue to operate the Japanese plants at half-capacity through April 27, when production will be halted from April 28 until May 9 during the Golden Week holidays, a period when plants are normally closed. Production in Japan will resume on May 10, again at half of the traditional output, through June 3, at which time Toyota's management will make a decision about future production rates.

In North America, the world's largest automaker announced cutbacks in production schedules as a result of the same parts issues. Toyota's 13 North American plants (nine in the U.S., three in Canada and one in Mexico) were ordered to cease production on Mondays and Fridays between April 15 and April 25, while the plants would continue to operate at half-capacity on Tuesdays, Wednesdays and Thursdays through June 3. Toyota also announced it would cease production in the U.S. for a week beginning May 30 and in Canada for a week beginning May 23, while the Mexico plant would continue to produce. Production plans for the time following June 3 are still being discussed, and a decision will be announced in the coming weeks.

Toyota is also going to cut production for a period of time in China. The Chinese plants are set to operate at 40% to 50% capacity beginning this Thursday, April 21, through June 3. While the supplier situation has begun to improve, Toyota initially was having problems with more than 500 different parts being delivered; it has been a slow process for the automaker. To date, no workers have been laid off as a result of the earthquake and tsunami, but if Toyota cannot find a way to get steady supplies again, that may be necessary in the future.

While Toyota is certainly not the only manufacturer to suffer these types of problems as a result of the March 11 devastation, it is one of the largest, and the ripple effect has been felt on all corners of the globe. Dealerships in North America are running out of vehicles to sell, and parts managers have been told not to order any parts that's are not absolutely necessary to fix a client's broken vehicle until the parts situation is settled. Toyota estimates it has lost 260,000 vehicles worth of production in the past month, and that number is only going to continue to increase if the supplier problems cannot be solved.

With gas prices continuing to increase thanks to the unrest in the Middle East, Toyota's fuel-efficient vehicles, especially the Prius, are in high demand. If consumers cannot get their hands on these vehicles, they will begin to go to other vehicle manufacturers to find new cars or trucks. While all of the automakers have faced similar supply problems, the American automakers have not been suffering as badly as the Japanese, for obvious reasons. The American automakers, as well as numerous European automakers, are certainly hoping to take advantage of the situation to boost their own market share in the coming weeks. It will be at least the middle of the summer before production gets back to normal, and that's if things continue to improve rapidly and there are no further disasters that cause setbacks for the automakers. In the meantime, Toyota and the other Japanese automakers are attempting to make the best of a bad situation while trying to hold off their competitors, a situation that is certainly not where Toyota expected to find itself heading into 2011.

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