Toyota, Nissan primed for comeback

by Hiroko Nakata

Staff Writer

Automakers were among the companies most heavily damaged by the March 11 earthquake and tsunami last year, but the road to recovery was fast and their plants are getting ready to make up for lost time.

During an inspection tour of Nissan Motor Co.’s Iwaki engine factory in Fukushima Prefecture late last month, Chief Executive Officer Carlos Ghosn brushed off concerns from local residents that the plant might be shut down because of the quake and the yen’s strength.

“Next year, (production) will be at least 300,000 engines,” Ghosn said, mentioning the plant’s annual average. He authorized a ¥3 billion investment in the plant, out of which ¥2.7 billion has already been spent, to reinforce its infrastructure.

“The recovery of this plant has been very fast,” Ghosn said.

When the Great East Japan Earthquake hit the Iwaki plant, part of the floor sank 9 cm. An aftershock the following month dropped it another 6 cm.

“Cylinder heads and crankshafts are parts where we need great precision when we produce them,” explained Daisuke Kinugasa, then manager of the plant’s administration section. The plant produces these crucial engine parts for its higher-end Infinity brand.

Due to the importance of having a stable foundation, the factory floor is being shored up with hundreds of pillars. The plant resumed full production last May, but the renovation work, which has bitten into output, won’t be finished until July.

The repairs won’t force the annual production target for engines to be revised because enough stock was produced ahead of schedule.

Rival Toyota Motor Corp.’s Tohoku plants are likewise back up and running. The temblor last year shut down all of its plants nationwide from March 14 to March 26, but two plants in Miyagi and Iwate prefectures were back up and running by April 18.

President Akio Toyoda boasted last month that the speed of the recovery was “historic.” To strengthen production in quake-hit Tohoku, Toyota will combine three group firms — Toyota Auto Body Co., Kanto Auto Works and Central Motor Co. — in July to make the region its third production center outside in Chubu and Kyushu.

“We see Tohoku as a center for compact cars,” Toyoda said, adding that an ideal way to maintain domestic production, which he pledged to keep at 3 million units annually, is to produce popular compacts like the Aqua hybrid.

In February, the auto giant said it received orders for 120,000 Aquas, 10 times more than its initial monthly target, in the first month following its Dec. 26 launch.

According to the Japan Automobile Manufacturers Association, domestic production by all Japanese carmakers fell to 8.4 million units in 2011, down 12.8 percent from a year earlier. It plunged by about 60 percent from March to April.

Output eventually rebounded, however, and production in February was 20 percent higher than the same month last year.

“Production in 2012 will surpass that in 2011 because of production recovery and stronger domestic demand,” said Masato Sase, in charge of the automobile sector at Deloitte Tohmatsu Consulting Co.

But there are still hurdles to overcome.

After the March earthquake and tsunami, and the flooding in Thailand carmakers have been trying to come up with ways to ward off future disruptions to their supply chains.

Many Japanese makers have long followed Toyota’s “Just in Time” system to minimize inventory and raise production efficiency.

From this point forward, automakers will have to decide whether it makes more sense to increase inventory or further diversify their parts makers, Sase said.