Toyota To Shut Down Production Even After Recalls

VIA REUTERS:

DETROIT/TOKYO (Reuters) – Toyota will shut down production at two of its U.S. assembly plants for a total of at least 11 days as it grapples with slower sales after a wave of safety recalls.

The shutdowns, announced on Tuesday, will affect Toyota’s San Antonio, Texas, and Georgetown, Kentucky, plants and represent the second time the world’s largest automaker has had to cut North American output because of a product safety crisis that has cost it sales and damaged its reputation.

Toyota Motor Corp faces a sales decline in the United States, its biggest and usually most profitable market, after the recall of more than 8.5 million cars worldwide since late 2009 for three separate defects.

Separately, U.S. safety regulators said on Monday the number of reported fatalities linked to unintended acceleration in Toyota vehicles had risen to 34, with a recent jump in complaints accounting for more than a third of the total.

Since January 27, the National Highway Traffic Safety Administration has added reports of nine crashes from 2005 to 2010 to its complaint database, alleging 13 fatalities and 10 injuries.

Like other major automakers, Toyota books revenue when it produces vehicles and ships them to dealers. By cutting output, it is choosing to take the hit to its sales in order to keep inventories of unsold vehicles from rising.

Toyota’s U.S. sales dropped 16 percent in January to the lowest level in more than a decade after the company suspended sales of about half of its inventory of vehicles due to accelerator problems.

A further sharp decline is expected for February since Toyota dealers expect that repairs to inventory will take most of the month to complete.

JPMorgan Securities auto analyst Kohei Takahashi said Toyota’s end-January inventory was not excessively high at 79 days’ supply of sales, and said the automaker would manage production to prevent inventory from spiking.

“Although it has already restarted production of models subject to recalls in North America, such production is being undertaken in lockstep with the prevailing sales conditions,” Takahashi wrote in a report to clients.

Toyota’s San Antonio plant, which makes the Tundra pickup truck, will be closed during a week in March and a second week in April, Toyota spokesman Mike Goss said in an email.

That time will be used to install equipment in the plant to produce the smaller Tacoma pickup truck, he said. Tacoma production will be shifted from the Fremont, California, plant that Toyota previously announced would be shuttered.

Previously, Toyota planned to use weekends to install the Tacoma production equipment without disrupting Tundra output, Goss said.

Toyota’s Georgetown plant, the automaker’s largest assembly plant in North America, will be shut down on February 26. The plant could also be idled for a few additional days in March, Goss said.

It was not immediately clear how much production would be lost because of the plant shutdowns.

The planned plant closures were first reported by Japan’s Chunichi Shimbun newspaper. It said Toyota had decided to close the Georgetown plant, which makes the Camry sedan, for a total of four days.

During the first week of February, Toyota halted North American production of eight models covered by a recall for potentially sticky accelerator pedals.

That production halt covered six plants in the United States and Canada, including Georgetown. Output at the plants resumed on February 8, as planned.

Toyota’s U.S. executives told dealers on Monday they were planning an aggressive marketing and incentive program for March to prevent consumers switching to other brands.

Steps being considered include a $1,000 rebate in addition to the $1,000 cash incentive being paid to returning Toyota customers as a loyalty reward, according to one person briefed on the still-developing plans.

Other options under consideration include a free maintenance program — including oil changes — or an expanded warranty program that matches the 10-year, 100,000-mile powertrain warranty offered by Hyundai Motor Co, the source said.

Earlier this month, Toyota estimated it lost 100,000 vehicles sales globally in the financial year to March 31 due to the recalls. It said it had no projections for the year beginning in April.

Toyota President Akio Toyoda and quality chief Shinichi Sasaki are scheduled to hold a briefing in Tokyo on Wednesday on the progress of the recall of the Prius for a glitch in the braking system.

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