#Thailand

Toyota says it will suspend production at its assembly plants in Indiana, Kentucky and Ontario, Canada, along with an engine factory in West Virginia to cope with a shortage of parts, caused by flooding in Thailand. The parts shortage is beginning to affect global operations.

Japanese carmakers, which barely have recovered from the effects of the March 11 earthquake and tsunami, find themselves in another catastrophe. Floods in Thailand cost Japanese automakers approximately 6,000 cars a day, Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association, said today in Tokyo.

Six months after having been devastated at home by the March 11 earthquake and tsunami, “Japan has experienced its largest overseas investment loss ever as a result of the flood disaster in Thailand,” Japans’s ambassador to Thailand Seiji Kojima told the Bangkok Post.

Japanese carmakers are driven out of the country by a rising yen and an urge to diversify their production after the catastrophic March 11 tsunami. A favorite destination is Thailand. Due to free trade agreements with many nations, Thailand increasingly morphs from the Land of Smiles to a South East Asian production and export hub. Now, most car production in Thailand is stopped – again because of killer floods.

Editor’s note: GM has officially confirmed what the UAW already let slip: Chevy’s new midsized Colorado pickup will be built at the Wentzville, MO plant and sold in the US. More details on that decision are forthcoming, but in the meantime, here’s Edd Ellison’s report from the global launch of the Colorado in Bangkok, Thailand.

Chevrolet has launched its new-generation Colorado in Thailand where it will be built and exported to 60 global markets. In true GM style, the ceremony was lavish – a cluster of truck ploughed their way through a large field of crops planted in a Bangkok exhibition hall watched by the media, dealers and VIPs packed into several grandstands – and the message was just as upbeat, the automaker feeling it has a product that can compete in the crowded mid-size segment.

Thailand, with a low currency, strong local demand and many foreign trade agreements, turns more and more into the South-East-Asian auto hub. Business-in-Asia gave it the unfortunate title “Detroit of Asia.” Thailand’s auto industry is targeting production of 3 million vehicles annually by 2015, more than countries like Canada, France, even Mexico currently make. Toyota, Honda and Nissan already have a pretty tight grip on the country. Now, Nissan is taking it a notch up.

A couple of days ago I wrote about how Peugeot is looking to South East Asia for the next area of big growth. I also mentioned in the article how Peugeot will have a tough time trying to crack that market. Toyota, Honda and Nissan already have a pretty tight grip on that area. Well, it appears that Toyota has put forward their first defensive stroke.

The heavy handed attempts to put the Japanese car industry in its place were totally unnecessary. Japan is perfectly capable of doing this all by themselves, with the help of the Godzilla-strength yen. Over the last issues, we have been chronicling the exodus of Japanese carmakers to lower cost countries with softer currencies. A trend even today’s yen intervention by the BOJ won’t stop. The last one we would have suspected of hopping on that bandwagon to cheaper shores was boutique carmaker Mitsuoka. But the purveyor of fine retro romance is also outta here.

When the high Yen drove Nissan out of Japan to Thailand, and to importing their Nissan March (elsewhere known as the Micra) from the Land of Smiles back to the Land of the Rising Sun, many thought this a daring, maybe even suicidal experiment. Will the notoriously nitpicky Nipponese buyer buy it? Or will “the first move by a Japanese carmaker to export a mainstay model to the home market,” as The Nikkei [sub] called it, be a resounding dud? Either the Japanese are changing, or Nissan pulled-off the impossible.

After President Obama paid his outstanding union dues and slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA, we predicted two outcomes:

1.) It will start a trade war, and China will drag the U.S.A. in front of the WTO. Sure did. The WTO accepted China’s complaint, and the t rade war turned into a major conflagration.
2.) We said that not a single new job will be created in the U.S.A., and “what the boneheaded decision does is simply shift tire production from China to other low cost producing countries.” Sure does.

Still convinced that the Yen is undervalued? Japanese carmakers beg to differ. They think the Japanese currency became so expensive that it gets cheaper for them to build abroad and to import to Japan. We’ve reported that Nissan is moving the production of their Micra (called March in Asia) to Thailand. When they did this, The Nikkei [sub] saw “huge implications for the future of the Japanese auto industry as a whole.” It certainly looks like Nissan’s exodus to the Land Of Smiles ( and occasional riots) started a trend.

You think Japan is import-adverse? Have a look at that chart that follows, and you will see a wondrous trend: Japanese automakers are importing more and more foreign owned cars to Japan. Some of them even from the U.S. Now, the imports will increase. Not from the US, but from ….

Demonstrations in Bangkok have been put down with a brutality not expected from the Land of Smiles. The stock exchange is on fire. Thailand instated a news and power blackout, making the number of killed and wounded hard to assess. Japanese car makers have long been invested in Thailand. Now, they are worried about long-term implications.

While bullets fly in Bangkok, Toyota announced today that production at a Toyota plant near Bangkok will cease by the end of May. Toyota says the plant closure has nothing to do with the public unrest, it should be seen on the context of the reorganization of Toyota’s global operations, says The Nikkei [sub].