Assembly lines at Japanese automakers operating in China are slowing drastically amid fallout from the dispute between Japan and China over sovereignty of the Senkaku Islands in the East China Sea.
The prospects for an improvement in output appear grim, for the next several months at least.
Toyota Motor Corp., for example, is planning to cut production in China for the rest of the year, sources said. Company officials have informed auto parts manufacturers and other business partners of its plan to cut production at its main Tianjin plant by close to 20 percent in the last two months of the year.
The Tianjin plant accounts for about 60 percent of Toyota's total production in China. According to the plan revealed to auto parts companies, the plant will cut production by 20 percent over the initial production schedule in November and reduce production by about 15 percent in December.
No indication was given by Toyota officials about production plans for November and December at its Guangzhou plant, Toyota's second largest in China. However, production in October at the Guangzhou plant is expected to decrease by 60 percent over initial plans.
Although there is the possibility of a review of production plans depending on sales trends, there are concerns that the reduced production could be long term.
Even before the anti-Japanese protests raged over the Japanese government's purchase of some of the Senkaku Islands from a private landowner, the market share of Japanese automakers in China had been falling.
Scenes of Japanese cars becoming targets of rioters in Chinese demonstrations have only fueled the tendency to avoid buying Japanese vehicles.
At the Tianjin plant, which manufactures the Corolla and Crown, a company executive said there was no place to put the finished cars because inventory has been piling up.
Toyota plans to stop production at two of its three assembly lines at the Tianjin plant for a week from Oct. 22. Production on the third line will only be minimal. Although the company plans to resume production at all three lines from Oct. 30, the production level will likely be kept low at first.
Meanwhile, the effect of the low sales are extending to auto parts manufacturers with production bases in China.
Companies with less work have turned to training sessions for their workers as well as inspecting production facilities. Some have even turned to asking workers to mow the lawn around the company plant.
Akebono Brake Industry Co. and Yorozu Corp., which manufactures suspensions, have reduced by half production at their plants in Guangzhou. That move was made because Nissan Motor Co., its main business partner, has reduced production by half. Company officials said reduced production levels will likely be maintained for the rest of October.
According to the Japan Auto Parts Industries Association, member companies have about 440 production bases in China.
One company official said, "We cannot foresee what the future will be like because the automakers have not presented clear production plans to us."
There are various forecasts for how long Japanese cars will face difficult times in China.
Among the more optimistic views is one held by Hiroto Saikawa, Nissan executive vice president, who said, "We are hoping to return to a normal production pace in about two months."
However, Takaki Nakanishi, a research analyst at Merrill Lynch Japan Securities Co., said, "The effects from the demonstrations will last for about three months in the optimistic view, and about half a year in the pessimistic view."
Nakanishi said the production cuts by Japanese automakers will mean that the market share estimate in China for 2012 could fall by three percentage points from about 25 percent.
(This article was written by Takeshi Narabe and Satoshi Kubo.)
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