Tuesday February 17, 2009

Toyota to cut production 54% in Q1 2009 as demand plunges

bloomberg.com :

Toyota, the world's biggest carmaker, will slash domestic production 54% in the current quarter as demand plunges in the US and Japan. The worst US car market in 28 years is forcing Toyota to widen production cuts after it slashed domestic output 23% in Q3 2008. The plunge in car production at Toyota is contributing to the country's sharpest economic contraction since the 1974 oil shock. "Operating at 50% of factory capacity can't yield a profit," said Koji Endo, a Credit Suisse auto analyst in Tokyo. Producing at 70-75% of capacity is the break-even point, he said. Toyota will eliminate 3,000 temporary workers in Japan by March 31. Toyota said its operating loss may total 450 billion yen ($4.9 billion) this fiscal year. Honda is also trimming domestic production, eliminating all of its 3,100 temporary workers in Japan. Nissan is slashing 20,000 jobs worldwide next fiscal year.

- Toyota cutting its production by half in itself is a pretty major story. But then there is another subtle point that might get lost at first glance. That is the magic 70% figure. I've heard talk of it in the semiconductor industry, where our local poster boy for low production figures is Chartered Semiconductor. Next, I heard talk of airlines cramming passengers into fewer seats to try to keep the load factor up above 70%. Now we hear the same 70% figure from the car industry.

Perhaps the modern economy as it is isn't structured to withstand contractions of 20-30%. We could be looking at an event horizon here as the global economic collapse grinds on. What would the world economy look like when it comes out on the other side? Right now, it's anybody's guess.

See also :

1. Japan GDP shrank annual 3% in Q2 2008, revised figures show
2. Singapore, Taiwan GDP may shrink 10-11% in 2009 : CLSA
3. Nissan to slash 20000 jobs in mass layoff, sees annual loss in 2009
4. Japan exports plummet record 35% as recession deepens

(2009-02-17 20:07:37 SGT) [Biz] Permalink

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