Automotive Industries fear major shortages

Thailand’s worst flooding in half a century has forced a number of parts makers and Japanese manufacturers to halt production in Thailand, raising fears the flooding may affect manufacturing worldwide.

The Yomiuri news paper reported today that all five key industrial zones were under water in the historic city of Ayutthaya, about a one-hour drive north of Bangkok. Many Japanese automobile and electronics manufacturers are located in the city.

It has been impossible to enter the area without a boat, and many factories are completely submerged.

About 320 Japanese companies suffered damage from the floods.

It is expected to take several months before full operations resume, and companies are rushing to find alternate production facilities or supply routes for parts.

Thailand, home to many parts makers, plays a critical role in the global supply chain. If disruptions are prolonged, it could upset manufacturers worldwide, according to Merrill Lynch Japan Securities Co.

Flood-hit Honda seeks tax exemption

The Thailand-based subsidiary of Japan’s major car maker Honda Automobile (Thailand) Co., Ltd on Tuesday asked the Thai government to exempt tax on the import of cars and auto parts to help ease its tax burden as its factory was severely hit by the country’s worst flooding in decades which submerged hundreds of its new cars and halted its production line.

Pitak Pruttisarikorn, senior vice president of Honda Automobile Thailand, told reporters of the request after meeting with Industry Minister Wannarat Charnnukul and discussing the impact of the current flooding.

Mr Pitak said he has asked the government to exempt tax collection on the import of car spare parts and machinery from non-ASEAN countries to lessen the flood impacts on business overall and to shore up the auto industry.

The Honda executive pledged that the company will take care of the 6,000 workers in its Rojana Industrial Park plant, as well as its approximately 100 dealers nationwide as it does not want to stop production amid fears that this could affect a series of small- and medium enterprises.

Mr Pitak said the total damage at its Rojana factory has not yet been estimated as it is still submerged.

The Honda executive said the company currently produces 170,000 vehicles annually, but the volume of production now depends on the flood situation.

The Japanese automaker executive assured the Thai government that the company would not relocate its production base elsewhere after 47 years of investment in the kingdom.

“Although the flooding disrupts the export of auto parts, (we) will try to find sources from other countries to compensate for the shortage,” Mr Pitak stated.

The industry minister said he would bring up the request to discuss with the Board of Investment (BOI), the finance ministry and the cabinet next week.

Honda earlier said it had closed its production lines from last Tuesday after two industrial estates in Thailand’s historic city of Ayutthaya, north of Bangkok, were inundated.

Hundreds of new Honda cars were submerged in its factory in Rojana Industrial Park. (MCOT online news)

Public date: October 18th, 2011
Categories: AUTOMOTIVE

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