Japanese automakers Toyota Motor Corp. (TM) and Honda Motor Co. Ltd. (HMC) are likely to modify their "just-in-time" manufacturing system to avoid possible supplier bankruptcies disrupting production, Bloomberg reported on Tuesday.
US auto majors General Motors Corp. (GM) and Chrysler LLC recently won $13.4 billion in emergency federal loans to keep them operating through March 2009. Meanwhile, another auto giant Ford Motor Co. (F) said it has enough cash to go through 2009. The struggles at GM and Chrysler reportedly had left as many as a third of North American component-makers at risk of bankruptcy.
According to researchers at the Center for Automotive Research, or CAR, a full or partial contraction of the Detroit Three would seriously affect domestic production by international automakers in the United States for at least a period of one year due to the high likelihood of many U.S. supplier company insolvencies.
The research report also shows that an expected major wave in supplier bankruptcies or a "supplier shock" would result in zero domestic production in the U.S. by international producers as well as Detroit companies with an assumption of 100% contraction scenario. Also, the collapse of a domestic market for suppliers, together with the fact that only a few auto suppliers serve export markets, would result in manufacturing utilization rates below 50%, forcing suppliers to restructure or liquidate.
Toyota's Just-in-Time, or JIT, system, as per the company's web site, has the objective of "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible." In this concept, each process produces only what is needed by the next process in a continuous flow.
Toyota may work with more parts makers and increase inventories to ease the effects of a collapse among its U.S. suppliers, the report said.
Toyota on December 22 had slashed its fiscal 2009 earnings forecast drastically, mainly reflecting wider-than-expected slowdown in the automotive market, and further appreciation of the yen. The company also said it now expects an operating loss, which reportedly would be its first annual operating loss in 71 years, mainly reflecting lower North American sales outlook.
Honda Motor also has recently lowered its earnings and sales forecasts for fiscal 2009, citing further deterioration in its business environment.
TM closed Monday's regular trading session at $64.00, up $0.35, on a volume of 1 million shares.
HMC closed Monday's trading at 20.73, up $0.11, on a volume of 866 thousand shares.
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December 19, 2025 15:10 ET U.S. inflation data and interest rate decisions by major central banks were the highlights of this busy week for economics news flow. Employment data and survey results on the housing markets also gained attention in the U.S. In Europe, the European Central Bank and Bank of England announced their policy decisions and macroeconomic projections.