Tuesday, January 6, 2009

Toyota to Halt Production for 11 Days

Still need proof that the economy is sour and that no one is buying automobiles? Toyota has just announced that it will stop production at its Japanese plants for 11 days in February and March. The move is unprecedented in Toyota's history and comes on the heels of abysmal December sales results.

Toyota's sales slumped a whopping 37% in December which is an even greater loss than Ford or General Motors. The month of December was horrific overall for the major auto makers but Toyota's sales results were surprising. In December, Toyota runs its "Toyotathon" sales event to spur on the end of year buying, but it obviously failed. Now, the Toyota dealers are sitting on lots full of new cars, which is the reason for production cuts.

The big question is, "What will Toyota do to right the ship?" Aside from the plant closings, we will soon see just what Toyota is made of and whether or not they can reverse this sales trend.

From Automotive News:

"Toyota Motor Corp. will halt production at its Japanese plants for 11 days in February and March as plunging U.S. sales has left dealers' lots full of unsold cars.

A 37 percent slump in December sales in Toyota's biggest market was its sharpest fall in more than a quarter of a century and worse than declines at U.S. rivals General Motors and Ford Motor Co.

"I never expected the crisis to spread this fast and leave this deep a scar," Toyota President Katsuaki Watanabe told reporters at a event in Tokyo hosted by Japan's top business lobbies.

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. In 1993, Toyota halted output for one day as a strong yen crimped sales.

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

Automakers across the world are cutting back production as consumers, hit by tight credit, shy away from big-ticket purchases even as companies boost sales incentives.

Honda, Nissan Cuts

Domestic rivals Honda Motor Co. and Nissan Motor Co. have both 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. Toyota plans to turn the 11 days in February and March into a paid company holiday, 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 U.S. sales slide was no surprise -- it was Toyota's 11th monthly decline for the year -- 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 (U.S. sales) results were disappointing."

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 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 U.S. 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."

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