Toyota criticized with more supply chain problems due to Japan earthquake

TOKYO – Toyota TM -0.02% Motor Corp. is planning to close most of its factories in Japan for several days next week, blaming a parts shortage caused by the 7.4-magnitude earthquake that hit eastern Japan on Wednesday.

Toyota said Friday that some of its suppliers were affected by the earthquake and were unable to deliver enough spare parts. Toyota did not name the company, but Renesas Electronics Corp., a major maker of microchips, said separately that its factories in the quake zone would not return to full production until Wednesday next week.

This latest hiccup in Toyota’s supply chain highlights the challenging and unknown region in which auto companies find themselves as these disruptions continue to affect their outlook and delay a full recovery in factory production.

The shortages caused by Covid-19-related factory closures have been exacerbated by a deadlock in the shipping industry and several disasters. Volkswagen CEO Herbert Diess said Tuesday that the war in Ukraine threatens to fluctuate the company’s outlook for this year.

Meanwhile, the scarcity of cars as a result of the industry-wide supply chain crisis is helping drive up prices. Friday’s announcement may deepen the problem as it affects production of some of Toyota’s most popular models, including the RAV4 SUV.

Toyota has been among the best automakers prepared to deal with the parts shortage associated with the pandemic. Photo: Masanori Inagaki/The Yomiuri Shimbun/Reuters

Toyota was among the best automakers prepared to deal with the parts shortage associated with the pandemic, and remained largely unaffected for several months. That helped the Japanese automaker, General Motors’ biggest competitor, with US sales last year for the first time ever.

Toyota executives attribute their ability to survive in the auto industry to their foresight and hoarding of hard-to-obtain semiconductors.

Even as other automakers began warning about a worsening parts shortage, Toyota stuck to its annual production target of 9 million vehicles. That changed abruptly in January when the company announced six production cuts in one month.

In an industry that prides itself on predictability, auto giants like Toyota say they are no longer sure what awaits them each month.

Toyota already revealed production cuts for March earlier this week, blaming a global supply crunch, before the earthquake made matters worse. Between those previously announced shutdowns and Friday’s announcement, Toyota expects to produce 50,000 fewer vehicles than planned this month.

Toyota also revealed it cut production plans by 150,000 units for April, saying suppliers are struggling to keep up. The Japanese automaker said further cuts were likely in May and June, but it could not be sure of their size.

Toyota said it was trying to revise production plans to better match current market realities, adding that the scramble to meet previous targets was overwhelmed by factory workers and suppliers. Now, the company has said it will impose a “deliberate pause” on its production targets, instead adjusting them in line with the availability of workers and the supply of parts.

The Covid pandemic has strained global supply chains, causing freight backlogs that have driven up costs. Now, some companies are looking for long-term solutions to prepare for future supply chain crises, even if these strategies come at a high cost. Image caption: Jacob Reynolds

Write to Sean McClain at [email protected]

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Featured on March 19, 2022, print edition as “Toyota shuts down most plants in Japan after earthquake disrupts supplies.”

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