Fri, Oct 28, 2011 - Page 10 News List

Impact of Thai flooding begins to spread globally

SUPPLY SHORTAGE:From camera makers like Nikon to auto manufacturers like Ford and Toyota, firms are starting to suffer because they cannot build products

Bloomberg

Toyota Motor Corp canceled overtime shifts planned for this week at plants in North America and Ford Motor Co suspended output in Thailand because of parts-supply shortages caused by flooding, the companies said separately on Wednesday.

Shipments of PCs may drop, leading to lower prices for memory chips, if supply-chain disruptions from Thailand’s worst floods in half a century last into next year, Hynix Semiconductor Inc said yesterday.

Output losses from the floods that have inundated about 10,000 factories are spreading beyond Thailand as supplies of components for cars and computers are disrupted.

CLOSURES

Operating profit at Toyota may be reduced by ¥125 billion (US$1.65 billion) as plant closures cut production by 250,000 vehicles through last Thursday, analysts at Credit Suisse Group AG led by Kunihiko Shiohara said in a report dated Wednesday.

“Difficulties securing electronic components are likely to have increasingly significant impacts,” Credit Suisse said in the report.

Toyota’s overtime cancelations will affect auto-assembly plants in Indiana, Kentucky and Canada and an engine factory in West Virginia, the Toyota City, Japan-based company said.

Ford may lose production of 30,000 vehicles, Lewis Booth, chief financial officer at the Dearborn, Michigan-based carmaker, said on an earnings conference call.

“Although our vehicle assembly plant is not affected, a number of our suppliers are,” Booth said. “We are working closely with our affected suppliers to return to production as quickly as possible.”

DAMAGE

The floods may cause about 140 billion baht (US$4.6 billion) of damage to manufacturers in seven industrial estates, Thailand’s Office of Insurance Commission secretary-general Chantra Purnariksha told reporters in Bangkok on Wednesday.

Thailand’s economy will grow less than 3 percent this year, damped by the effects of the disaster, Thai central bank Governor Prasarn Trairatvorakul said on Tuesday.

Japan’s casualty insurers may face about ¥190 billion in net payouts to cover damages from Thailand’s floods, according to Deutsche Bank AG.

Japanese property and casualty insurers have underwritten as much as 70 percent of seven flooded industrial estates in Thailand that are facing about 410 billion baht in damages, Masao Muraki, a Tokyo-based analyst at Deutsche Securities Inc, said in a report on Wednesday, citing estimates provided by the Japanese Office of the Insurance Commission.

Honda Motor Co, Japan’s third-largest carmaker, closed plants in Thailand and Malaysia after a factory in Thailand was flooded. Nissan Motor Co, Japan’s second-largest automaker, has closed its Thai factory, citing parts shortages.

Nikon Corp, the world’s second-largest maker of cameras with interchangeable lenses, halted its largest facility for making such cameras in Thailand, while Sony Corp, Japan’s biggest exporter of consumer electronics, delayed the release of some cameras and headphones because of disruptions in Thailand.

DISK DRIVES

Broadcom Corp, the largest maker of chips for TV set-top boxes, expects flooding in Thailand to halve the expected 200 million total shipments of hard-disk drives in the fourth quarter, CEO Scott McGregor said on a conference call with analysts on Tuesday. That may affect shipments of PCs and digital video recorders, he said.

Thailand makes about a quarter of the world’s disk drives. Dublin-based Seagate Technology PLC expects a “widespread impact” on the hard-drive industry from the flooding, it said last week. While the company’s factories in Thailand remained operational, suppliers were being affected, it said.

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