UPDATE 2-Honda's Thai factory shut as floods hit Japan firms

* Honda worst hit of Japan automakers, unsure when it can reopen

* Honda 3-mth Thai closure could cut op profit 25 bln yen -analyst

* Toyota to close 3 plants until at least Oct 15, Nissan open

* Nikon, Canon, Ajinomoto, Kubota among others affected

* Tightens firms’ output capacity as they recover from Japan disaster

By Tim Kelly

TOKYO, Oct 12 (Reuters) - Honda Motor Co shut a plant in central Thailand because of flooding, closing down 4.7 percent of its global output, in a natural disaster that has echoes of the supply chain disruption caused by Japan’s earthquake and tsunami.

Other Japanese firms that set up production hubs in Thailand, including Toyota Motor Corp , Canon Inc , Pioneer and Sony Corp , have reported flood damage to plants or supply snags affecting production.

The earthquake and tsunami that swiped the northeast of Japan on March 11 destroyed factories and crumpled supply chains, impacting companies globally.

While supply chains have been largely repaired following the Japanese quake, Japanese firms had relied on plants in other countries to make up for lost production. With manufacturing now hobbled in Thailand, they have less capacity at home to make up for the shortfall in the post-quake catch up.

The north of Thailand, the northeast and central plains have been badly affected by heavy monsoon rains, floods and mudslides. Bangkok, just two metres above sea level, is in danger as water overflows from reservoirs in the north.

Thailand’s Finance Ministry has estimated the initial cost of damage at 69 billion baht ($2.2 billion). It expects economic growth this year to now be 3.7 percent, rather than 4 percent.

HSBC says the floods may cut its 4.7 percent growth estimate for the fourth quarter by 1 percentage point.


The eastern seaboard of Thailand, home to refineries, petrochemical plants and car factories, has not been affected by the floods.

But the centre of the country, including Ayutthaya province, is one of the worst hit areas and has plants production electronic goods and parts, hard disk drives and cars and parts.

Toyota has been forced to curtail production because of disruption to its supply of parts rather than any physical damage to its own facilities. Nissan Motor Co said it may experience some disruption to its operations.

That suggests Honda risks losing the most from the floods among Japan’s big three automakers.

“Cars at the facility (in Ayutthaya) appear to be floating,” Honda spokesman Tomohiro Okada said.

As no one is allowed into the area, Honda is still unable to assess the damage to production machinery or give any estimate of when output, halted since Oct. 4, can restart, he added. It makes cars and parts at its Ayutthaya complex.

“We think resuming production will take some time,” Nomura analyst Masataka Kunugimoto wrote in a report.

If it takes three months, that would mean lost production of 60,000 vehicles and could shave 25 billion yen ($325 million) off operating profit, he estimated. For the year to March 31, Honda expects operating profit of 270 billion yen.

Honda’s Thai plant supplies parts to other factories in the region, so the damage may infect its supply chain and hurt output in other locations unless it can rustle up parts from elsewhere.

“Capacity utilisation in Japan is already high to meet post-earthquake recovery demand, so Honda’s Japanese plants may not be able to supply sufficient volumes,” Kunugimoto said in his report.

Toyota said on Wednesday that it would close its three Thai plants, which account for around 8 percent of its global production, until at least Oct. 15 because of a dearth of parts.

Nissan’s plant will operate normally until Thursday, a spokesman said, but output from Friday remains “a question mark” because it was uncertain if it would be able to receive parts.


Sony closed a camera factory in Ayutthaya on Tuesday and said it would be shut at least until Friday. The plant is Sony’s only one globally that makes bodies for its interchangeable lens cameras, including its NEX mirrorless series.

Other Japanese firms affected by the floods include Nikon Corp , which was forced to halt production of cameras in Thailand. The factory, Nikon’s only one globally that makes digital single-lens reflex cameras for entry-level and semi-professional users, can produce up to 5 million units a year.

Rival Canon said it would be unable to operate its printer plant in Ayutthaya until at least Friday because of flooding.

Minebea , Japan’s leading ball bearing maker, said two of its five factories, both located in Ayutthaya, had closed. One of them, which makes die cast parts, was flooded the company said.

Hoya , Japan’s largest fabricator of optical lenses and glass components, said it had halted output at a factory in the same area making spectacle lenses.

Other plants in northern Thailand producing glass substrates for hard disk drives and other products were unaffected, the company said.

Pioneer , a manufacturer of navigation systems for cars, announced that two if its production sites had been partially flooded, forcing it to halt operations on Oct 8. It added that it didn’t know when it could reopen the plants.

Ajinomoto , a Japanese food and flavourings maker, also shut down two plants in the region. One, which flooded, makes beverages, the other producing frozen foods.

Farm equipment builder, Kubota , said it will halt production of tractors in Thailand from Oct 17 because of difficulty procuring parts.

Nippon Meat Packers , Japan’s biggest producer of ham and sausages, said on Wednesday that two of its plants in the region had been closed since Saturday and it was not yet sure when they would restart.

Most of the shares in Japanese companies affected by the Thai floods underperformed the Tokyo market on Wednesday.

Honda fell 2.2 percent, compared with a 0.4 percent decline in the benchmark Nikkei average.

Toyota fell 0.3 percent, Nissan dropped 1.6 percent and Nikon lost 3.5 percent.

Canon ended the day 0.3 percent lower with Nippon Meat Packers losing 1.5 percent, Ajinomoto 2.4 percent, Kubota 2 percent and Pioneer 4.3 percent. Minebea gained 0.4 percent with Hoya up 0.2 percent.