Impact on Japanese Automakers and Steel Companies
swapnil tambe
Impact on Japanese Automakers and Steel Companies from Earthquake
11 March earthquake in Japan will likely have negative short-term impact on the production and shipment activities of the Japanese automakers and steelmakers, but adds it is too early to gauge the disaster's long-term ratings impact on the sectors.
Although only a few automakers such as Toyota Motor and Nissan Motor had manufacturing presence in the areas directly affected by the earthquake and the subsequent tsunamis, almost all automakers and some steelmakers suspended operations after the quake to assess the potential impact on their operations. While immediate damages to the plants and equipment might be limited, production and shipments could be affected by potential disruption in the supply chain, logistics and electricity supply.
At this stage it is difficult to quantify the impact on individual companies, adding the extent to which each company's business and financial profile will be affected varies according to its specific circumstances.
The direction of the Japanese yen over the next three to six months as a result of this catastrophe will also affect the profitability of the Japanese automakers. After the 2008 financial crisis, a strong yen against other major currencies has adversely affected the automakers' revenue and profitability.
More details on the companies are as follows :
Toyota Motor Corporation ('A+'/Stable by Fitch)
The company has suspended production at all factories in Japan until 16 March. It has estimated an output loss of about 40,000 units. For the nine months ended December 2010, domestic production accounted for over 50% of total global production.
Honda Motor Co., Ltd. ('A-'/Stable by Fitch)
The company has suspended production at all facilities in Japan until 20 March. It estimated that the output loss would be about 4,000 vehicles a day. In 2010, domestic production accounted for 27% of total global production.
Nissan Motor Co., Ltd. ('BBB-'/Stable by Fitch)
The company has suspended the production of its Tochigi and Iwaki plants until 18 March, while the production at Nissan Motor's four remaining plants have been put on hold until 16 March. For the nine months ended December 2010, domestic production accounted for 28% of total global production.
Nippon Steel Corporation ('BBB+'/Stable by Fitch)
The company has restarted three blast furnaces at its major Kimitsu factory in Chiba, and is also resuming rolling operations. The steelmaker stopped production at its Kamaishi plant in northern Japan, after some facilities were inundated by the tsunami. The plant produces wire rods used in tires and bridges, and Nippon Steel is considering moving the production to mills including Kimitsu to maintain supplies. The eventual rebuilding of the affected region will add to steel demand, which may support domestic steel prices, especially for long steel products.
Swapnil Tambe.