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Automobiles

Pandemic forces Japan carmakers to slash global output 30%

'We don't see the end of the tunnel,' one executive says

An assembly line worker at Nissan Motor's U.S. auto plant in Smyrna, Tennessee.   © Reuters

TOKYO -- Coming on the heels of shutting down European plants, Toyota Motor and other Japanese automakers are suspending U.S. production to fight the new coronavirus, moves that will bring down their global output by around a third.

"Just as we were finally able to restart operations in China, we are facing the outbreaks in Europe and North America," a carmaker executive said, noting that "we don't see the end of the tunnel."

Even with the projected decrease in supply, demand is diving and the outlook grim, sparking concerns that export-reliant production in Japan might also need adjusting.

Toyota has extended the shutdown at all 13 of its North American factories, initially scheduled for just this coming Monday and Tuesday, to nearly two weeks through April 3. Subaru said it is pausing operations at its plant in the state of Indiana for one week from Monday to March 29.

Japanese automakers together built 26.07 million vehicles around the world in 2019. But with the suspensions, their production will likely temporarily decline by roughly 30%, shows a Nikkei survey of seven companies on their recent output and plant operations.

The latest wave of shutdowns comes just as automakers resume Chinese operations. Nissan Motor said Monday that all four production bases in China had restarted by March 14. Sweden's Volvo Cars said Friday that Chinese plants have reopened and "showroom traffic is indicating a return to normal in China's car market," even as American and European factories remain shuttered.

Toyota reported March 13 that production in Guangzhou, China, would resume as usual the following Monday, while Honda Motor has reopened its Chinese plant in Wuhan, the initial epicenter of the outbreak.

But as operations return to normal on one side of the world, they are anything but on the other.

Honda is temporarily closing all seven auto assembly plants in North America from Monday to March 30. Nissan is ceasing production at its three U.S. plants from Friday through April 6.

Japanese automakers have already suspended assembly plants in Europe, outside of Russia. Toyota has halted operations indefinitely at factories in the U.K. and France. Suzuki Motor will close production facilities for sport utility vehicles for two weeks, starting Monday.

The suspensions come amid efforts to slow the spread of COVID-19 and in response to plummeting sales. Fears of an extended period of weak demand are mounting. If this comes to pass, automakers' manufacturing activities in Japan will be affected as well, according to senior analyst Toshihide Kinoshita of SMBC Nikko Securities.

"Initially the challenge was procuring Chinese-made parts, but now the risk has shifted to a sales decline resulting from falling demand, and that's the No. 1 issue," a senior official at an automaker said.

Subaru ships half of the vehicles it builds in Japan to the U.S. market. Mazda Motor and Nissan each export a little over 30% of domestically manufactured products to North America, while Toyota's figure is a tad more than 20%. Mazda and Mitsubishi Motors export about 20% of Japanese-made vehicles to Europe.

Japan's exports of finished vehicles and auto parts to the U.S., Canada and Mexico totaled about 6 trillion yen ($53.9 billion) in 2019, or a third of all exports to North America, according to government trade data. Auto exports to the European Union bloc, roughly 2 trillion yen, also made up a quarter of the total.

Auto parts makers, which ship electronic parts, drivetrains and other components from Japan to North America, are also hit hard by the COVID-19 pandemic. Exports to North America totaled 1.8 trillion yen in 2018, accounting for 30% of all overseas shipments, while shipments to Europe -- including Russia and Turkey -- came to 1.16 trillion yen, according to the Japan Auto Parts Industries Association. Prolonged suspensions of automobile production across the globe would threaten parts output back home, too.

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