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Toyota to freeze production

2009-01-06 07:24

Tokyo - Toyota Motor Corporation, the world's biggest automaker, is to halt production at all its Japanese plants for a total of 11 days in February and March in a bid to reduce stocks of unsold cars as demand has slumped.

Toyota's sales in the United States, its biggest market, dropped 37% last month, its weakest performance in more than a quarter of a century and worse than struggling US rivals General Motors and Ford Motor.

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

Japanese-built cars make up around 40% of Toyota's sales in the United States.

A sweeping suspension of domestic production is almost unprecedented. In 1993, Toyota halted production for one day as a strong yen hammered sales, a spokesman said.

Toyota warned two weeks ago it would post a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen, and said it would adjust production as needed beyond January.

Analysts said the dismal US sales were no surprise and the outlook for the global car industry remains tough.

"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."

Toyota shares rose 1%, however, in line with the broader market, as exporters rallied on a softer yen.

With virtually all markets weakening, Toyota said it would suspend operations at the 12 plants for six days next month and another five days in March.

On Monday, data showed Toyota's Japan sales slid 18% in December, and were down 7.4% for 2008.

Toyota does not disclose the number of vehicles affected by the production stoppage.

Toyota and local rivals Honda Motor Co and Nissan Motor Co are all expected to cut global vehicle production sharply in January-March to work down swollen inventory in the United States.

But auto industry executives have warned of a difficult and unpredictable 2009.

Toyota President Katsuaki Watanabe said last month the company would aim to rationalise global operations to create a cost structure that would generate profits from parent-only vehicle sales of 7 million units, about 1 million fewer than it sold last year.

The slump in demand for cars, as consumers put off big-ticket purchases amid a global credit crunch, has had a swift and damaging knock-on effect on auto parts makers.

The Nikkei financial daily reported on Tuesday that Bridgestone Corp, Japan's top tyre maker, expects its calendar 2009 operating profit to fall 155 to about 100 billion yen ($1.07 billion).

Last month, Bridgestone lowered its 2008 operating profit estimate to 118 billion yen from 155 billion yen.

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