Thailand’s government has approved a plan to let Honda import assembled cars tariff-free until next June to replace output lost because of recent flooding.
The waivers will apply from October 25 this year until June 30, 2012 with the stipulation that import volumes do not exceed last year’s production output.
The Thai government has also said that all car manufacturers will be able to import parts and machinery tariff free to replace products damaged by the floods but that only Honda will be allowed to import complete vehicles tariff free because of the severity with which it was affected.
The Japanese carmaker sustained the most disruption when the floods hit the Rojana industrial park in the badly-affected Ayutthaya region where it has an assembly plant with an annual capacity of 240,000 vehicles. Honda was forced to shutdown the plant on October 4 because of widespread damage with the consequence that domestic sales will be cut by 30% this year. Full production is not expected before April 2012.
The impact on the Rojana park also led to supply chain disruption as component makers were unable to maintain production, with consequences for global output, including in North America where vehicle assembly was reduced to approximately 50% of normal output in November. While the vast majority of parts and materials used to produce Honda’s US-made vehicles are purchased from suppliers in North America (87% in 2010), some critical electronic parts are sourced from Thailand.
Now, however, Honda has said that it will resume normal production at all of its North American plants by December 1 thanks to an improvement in parts supply. Honda said it is working closely with its suppliers to fully re-establish the flow of parts for the products made there and a spokesman for Honda North America told Automotive Logistics that the company had now established alternative sources for parts, and enlisted its logistics suppliers to help where needed.
While the company is not releasing specific information about its suppliers in Thailand, the spokesman added it has re-sourced some parts outside the country and helped other suppliers inside the country meet their delivery requirements.
“This strategy is working for the North American market,” he said. “It's important to note that we don't export any finished products from Thailand to North America, so this is a parts problem only. Meanwhile, our Asia operations are continuing to deal with the flooding.”
In it most recent update on the production shortages Honda said it would update the information on the flow of parts in the event changes are required. Asked whether this meant that full production could be subject to future downtime in December, the spokesman said that, while there are still outstanding supply issues to be dealt with, the company was confident enough in the information it now had to say that production would be normalised in its North American plants on or before the beginning of December.
“We are hoping that this is the end of our downtime for North America,” he said but added that in any severe situation caused by a natural disaster there will always be the possibility of some change in conditions.
The disruption was to have delayed the planned December US launch of the new 2012 Honda CR-V by several weeks but Honda said last week that production would begin at the East Liberty Auto Plant in Ohio this week and go on sale as scheduled on December 15th, despite production adjustments.
As for the return to full outbound shipments from its six North American facilities to the dealers, Honda said that it would rely on a robust outbound delivery system – primarily rail – in the US and Canada.
Elsewhere, the Suzuka and Saitama factories in Japan will normalize production on December 5, while Honda Europe has said it will resume normal production in the UK and in Turkey on December 19 at which time it will also start production of the new Civic.
In India, however, Honda Siel continues to face disruption to production at its Greater Noida plant where the Honda Brio, Jazz and City are made.