Toyota warns dealers about new car supply

By Dow Jones Newswires-Wall Street Journal
Posted April 11 at 4:52 p.m.

Toyota Motor Corp. has warned its U.S. dealers that the supply of new vehicles could become “significantly impacted” by the summer, according to a memo distributed Sunday.

The memo is the clearest statement by Toyota that the shortage caused by the March 11 earthquake and tsunami will last into the third quarter.

The company also outlined further cuts in production and supply issues stemming from the earthquake and tsunami in Japan, which has shut down many suppliers and forced Toyota to halt production in Japan for nearly a month.

“What we don’t know are vehicle production levels for May through July,” Bob Carter, head of the company’s Toyota brand in the U.S., wrote in the memo. “The potential exists that supply of new vehicles could be significantly impacted this summer.”

Toyota spokesman Mike Goss declined to comment specifically on the memo, but said it was too early to say how badly the summer supply of vehicles would be affected. “It’s still too early for us to say precisely,” he said. “We just don’t know yet the full picture.”

The memo, a copy of which was reviewed by The Wall Street Journal, said also the auto maker’s North American plants will take an “extended Easter break” beginning April 21. Toyota’s North American plants are already operating on a reduced schedule, and will be idled for five days between April 15 and April 25.

“They will also take an extended Easter break starting April 21” due to parts shortages, Carter wrote in the memo.

A decision on whether to go back to the reduced schedule of idling the plants two days each week “will be made at a later date once the parts pipeline has been determined.”

The memo also said Toyota is changing the colors of exterior paints it offers because of a shortage of a chemical used in certain paints that is made at a plant in Japan that was severely damaged in the March 11 quake. Ships carrying new vehicles will leave Japan every two weeks and make stops at six ports to speed exports to North America, Carter wrote.

The effect is that dealers will be getting cars in smaller batches more often than under normal circumstances.

He added that Toyota has an inventory of about 300,000 cars and trucks in the U.S. and noted that the company has just 72,000 cars and trucks on dealer lots after the “cash-for-clunkers” rebates were ended in early September in 2009.

“Today we have good levels of inventory, but inventory will be getting tighter,” the memo said. “Toyota will be producing new vehicles at significantly reduced levels.”

Carter said the company has been able to produce repair and replacement parts at a level high enough to prevent most shortages at U.S. dealers. A few weeks ago, the company put restrictions on the ordering of 233 replacement parts that could be ordered by dealers.

Honda Motor Co., which has been limiting production at its U.S. plants to about 50% normal volumes, extended the slow down through April 22, varying the production output from plant to plant based on the parts that are available, according to a memo that was sent by Executive Vice President John Mendel and was also reviewed by The Wall Street Journal.

Nissan Motor Co. also stopped production at its North American plants several days this month to conserve parts.

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