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Toyota to halt Japan output next week after steel plant explosion

Bloomberg

Toyota Motor Corp. said Monday it will suspend production at all assembly plants in Japan next week in the wake of a steel factory explosion, dealing a blow to the supply of crucial models including the new Prius hybrid.

All domestic assembly lines will halt Feb. 8 through Feb. 13, Toyota said in a statement. The company counts on Japan for more than 40 percent of vehicle production, including all assembly of the Prius and some Lexus models including the NX crossover.

Toyota’s Japan shutdown springs from the Jan. 8 explosion at Aichi Steel Corp.’s Chita plant, which supplies specialty steel for engine, transmission and chassis components. The automaker’s lost output underscores the fragility of its supply chain, which was disrupted by the March 2011 earthquake and tsunami.

“It’s always challenging to deal with something like this because maintaining a lean production system is Toyota’s goal,” said Koji Endo, an analyst at Advanced Research Japan. For the Prius and some SUV models exported to the U.S., “supply and demand is relatively tight, so if they have to reduce output, that’s going to be a problem.”

Aichi Steel said last month that the explosion at its Chita plant damaged a furnace and the building’s ceiling. The company, which is 33 percent owned by Toyota, aims to restart operations by the end of March.

Japan’s steelmakers agreed to cooperate with one another in the event of production disruptions after the 2011 disasters, Yumi Harada, an Aichi Steel spokeswoman, said by phone. Representatives for both Aichi Steel and Toyota declined to name other steelmakers that may be able to help alleviate the automaker’s steel shortage.

Toyota had suspended some parts exports and stopped overtime work at Japanese plants due to the Aichi Steel explosion. The carmaker’s assembly plants here are scheduled to restart Feb. 15, and operations outside Japan won’t be suspended, according to the company.

Toyota had been gearing up domestic production as a result of the new Prius, with demand for the new model leading the company to boost Japan output to about 14,000 cars per day, President Akio Toyoda told reporters in December.