Toyota production is embracing a tough time due to the earthquakes in Japan.
Toyota Motor Corp is on the verge of experiencing a massive dent on its bottom line performance in the present quarter. This is due to the production issues that have aroused due to a series of earthquakes in Japan. As per Bloomberg, the largest automotive seller in the world might just experience a drop in operating profits by almost $227 million of 30 billion yen for the present trimester. The earthquakes have had an impact on the southern part of Japan where the auto parts supply chain has suffered.
The company is likely to embrace a financial turmoil since it had to halt production last week at its Kyushu factories. Honda, another Japanese automotive company has also halted operation at Kyushu since various facilities in the region where affected by the Kyushu earthquake that had a magnitude of 7.0 on the Richter scale. This is not it but another earthquake of 6.5 magnitude also occurred which had an impact on the local trains and flights.
Out of three of the Toyota Motor Kyushu factories that halted operations, two have redeemed their operation as of yet. Honda on the other hand has stopped the production of its manufacturing plant situated in Ozu, Kumamoto. As per the Japan Times, the company executives stated that the company needs some time before they resume the operations at the facility again.
In the fiscal year of 2016, the automotive giant has stopped its operations for the second time which is not good news. Back in February, TM had to halt operations at its factory due to a fire that aroused at the company’s affiliate, Aichi Steel Corporation.
The automotive and manufacturing companies in Japan have been a victim of constant severe climatic conditions. Earthquakes occur on a frequent pace in Japan affecting the business fraternity in general. The top Japan based companies have come up with their business continuity plan almost five years back when the country embraced a streak of natural disasters. On the other hand, those companies which are operating in rough areas have to cope up with the obstacles in delivery and supply chain networks.
As per the recent business survey report produced by The Bank of Japan, the confidence in the businesses that are operating in rough regions is likely to go down to a great extent in the months to come. As claimed by The Japan Times, the index is going to slump from seven in March, 2016 to a negative one in June. Zero on the index portrays a neutral approach. Moreover, tourism is also going to get affected in the coming months.
As stated by Bloomberg, an analyst belonging to Mitsubishi UFJ Morgan Stanley came up with a report which claims that the company might also deal with a decline in production of 56,000 cars of Toyota and Lexus. They also made an acquisition of Daihatsu Motor Co. whose production will go down by 7500 cars. Apart from that, the financial declines will have an impact of almost 30 billion yen till the end of the second trimester.
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