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Company News

FACTBOX-Thai floods crimp global supply chains

Traffic clogged roads out of Bangkok on Friday as thousands of people fled ahead of a high tide that may worsen floods that have inundated factories and prompted foreign governments to warn citizens to stay away from one of Asia’s biggest cities.

The country’s worst flooding in half a century, caused in part by unusually heavy monsoon rain, has killed 373 people since mid-July and disrupted the lives of nearly 2.5 million, until now mostly in the north and central provinces.

The flooding has started to affect production of everything from cars to computer disk drives because Thailand has in recent years become a manufacturing base for Japanese and American carmakers and global technology companies.

Seven industrial estates in Ayutthaya, Nonthaburi and Pathum Thani provinces bordering Bangkok have been closed, causing billions of dollars of damage, disrupting international supply chains for industry.

Below is a look at some of the affected companies and products:

HONDA

Honda Motor Co has postponed the launch of a new model of its Life minicar due to difficulties in obtaining parts made in flood-hit Thailand, a company spokeswoman said on Thursday. Honda said it halted car production in Malaysia on Tuesday due to disruption of component supplies from Thailand.

TOYOTA

Toyota Motor Corp said on Thursday it plans to cut output in North America due to the impact of the Thai floods on its supply chain, and will halt production there on Oct. 29. Toyota may run out of key Thai-made components this month, as the floods disrupt supply of about 100 auto parts, the Nikkei business daily said.

LSI

LSI Corp said it expects its hard drive business to dip over 10 percent sequentially due to Thailand floods and said some of its subcontractors in Thailand had been affected by the floods. The company also said it faces exposure in its packaging and testing divisions due to the flooding.

DIGI INTERNATIONAL

Digi International Inc , a chip maker, said the flooding had affected the facilities of its contract manufacturer there and said all operations in Thailand were currently suspended. The company said it is assessing the potential financial impact of the production constraints and said it believes its revenue and gross margin will be impacted in the first quarter of fiscal 2012.

LENOVO GROUP

Lenovo Group Ltd , the world’s No.2 PC maker, said on Wednesday that it expected some constraints on hard disk drive supplies through the first quarter of next year after severe floods in Thailand crimped global supply.

FUJITSU

Fujitsu Ltd , Japan’s largest IT services vendor, said on Wednesday that disruption to hard-disk drive supply caused by floods in Thailand will have a large impact on its PC business in the October-December period, and it was hoping for a recovery in the following quarter. The company said it would tap its own HDD inventory and those of suppliers including Seagate and Toshiba to ease the impact.

NIPPON STEEL

Nippon Steel Corp , the world’s No.4 steelmaker, expects its steel shipments to decline by around 300,000 tonnes due to floods in Thailand, which would hurt its profits by around 5 billion yen ($66 million), a company executive said on Wednesday. The company also projected its crude steel output to total around 15.5 million tonnes in October-March, largely steady from 15.53 million tonnes in April-September.

AUTOLIV

Autoliv , the world’s leading maker of airbags and seat belts, trimmed its sales and profit margin forecasts on Tuesday in the face of an uncertain economic climate and component shortages from flood-hit Thai suppliers.

TESCO

Tesco , the world’s No.3 retailer, has closed more than 30 stores in Thailand as a result of the worst flooding the country has seen in 50 years, it said on Tuesday. The British supermarket group said the affected stores were mostly smaller outlets and represented just over 3 percent of its selling space in the country. Only three of the company’s hypermarkets were closed, a spokesman added.

CANON

Canon Inc on Tuesday became the first major Japanese firm to cut its annual outlook due to Thai flooding and the strong yen. Rivals Sony Corp and Nikon Corp were also forced to close plants. Canon said the Thai disaster would likely cut annual sales by 50 billion yen ($657 million) and operating profit by 20 billion yen for the financial year to the end of December 2011.

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