Thai floods sink Honda profits

Tuesday 31st Jan 2012 by theWeather Club

Image: Cpl. Robert J. Maurer. U.S. Marine Corps

The weather gods have not been kind to the giant car and motorbike manufacturer Honda in 2011. The company had just begun to recover from disruption to its supply lines caused by the March tsunami, when Thailand's worst floods in 50 years swamped the company’s vehicle assembly plant in Ayutthaya, north of Bangkok.

Placing the responsibility for the disappointing numbers squarely at the door of flood disruption, the company have announced that net earnings in the October-December quarter have fallen 41% to 47.6 billion yen (£396 million). The flooding forced the company to stop making cars completely at the Thai plant in October. While they are making progress in drying out the factory and repairing equipment, the company do not expect to resume any kind of production at the facility until March 2012 at the earliest. However the effects of the natural disaster were felt far beyond the factory itself.

The flooding also disrupted the output at many Honda suppliers in Thailand, forcing the company to reduce production as far afield as the U.S. and Canada. Meanwhile production disruption in neighbouring Asian countries caused by the problems in Thailand, were expected to continue until April this year. In fact taking all the different kinds of disruption into account, the problems related to flooding in Thailand have led to 260,000 vehicles being lost in worldwide production, according to Tomohiro Okada, a Honda spokesman. The disaster dealt such a blow to the Japanese company that it scrapped its earnings forecast when it last reported earnings results in October. Now Honda predicts its net profit for the fiscal year, up to March to have fallen nearly 60%.

The company said it is working with the local industrial park to build water protection walls around the plant and will make requests of the Thai government to take steps to prevent the risk of flooding in the future.