Honda and Nissan accelerate efforts to resume full output

By @ibtimes on

Two of Japan's top automakers are trying to accelerate their efforts to resume full production, adding to hopes that a recovery from the country's biggest earthquake on record was well on its way as the supply bottleneck eases.

Nissan Motor Co <7201.T> Chief Executive Carlos Ghosn said on Tuesday employees were working hard to restore production at Japan's No.2 automaker to full levels before an October target, after defying the odds with a speedy recovery at an engine plant that was badly damaged by the March 11 earthquake.

I can tell you that every single Nissan employee is trying to (prove) me wrong when I say October. This is absolutely a sense of motivation from everybody to say we're going to make it happen before October, Ghosn told Reuters in an interview at the Iwaki engine plant, about 60 km (30 miles) from Tokyo Electric Power's <9501.T> crippled nuclear power station.

But reasonably, I don't think it's going to be before October, he added.

The 560,000-units-a-year Iwaki factory, which builds 2.5 to 3.7-liter engines for the Fuga, Murano, Infiniti M, and other models, marked its return to full production capacity on Tuesday.

Japanese automakers have slashed production since the magnitude-9.0 earthquake on March 11 due to a shortage of supply from damaged parts makers, a few dozen of which are still seen as being in a critical condition.

The situation surrounding (the supply chain) restoration is constantly changing, so (production) plans are changed weekly or bi-weekly in some cases, but the (restoration) process is occurring quicker than first envisioned, said Yoshihiko Tabei of Kazaka Securities.

Honda Motor <7267.T> joined Nissan on Tuesday in saying the recovery of its parts supply is gathering pace.

We want to move up our schedule for returning to normal, but that depends on the supply of parts, Honda's chief financial officer, Fumihiko Ike, told a small group of reporters. But we are seeing recovery speed up in those supplies.

He said the company plans to announce its earnings forecast for the current fiscal year before the annual shareholders' meeting on June 23.

Honda has limited access to electronic components, rubber parts and coloring materials, Ike said.

Late last month, Honda said it expected vehicle production to fully return to levels planned before the March earthquake by year-end and to stay at about half those plans through the end of June.

Ike said on Tuesday this was a worst-case scenario, however, suggesting the situation at the automaker could be better than previously expected.

Reporting full-year earnings in May, rival Toyota Motor Corp <7203.T> painted a more upbeat picture, saying production would gradually pick up from June.

NISSAN PLANT CELEBRATES RECOVERY

Addressing about 400 employees at the Iwaki engine plant to celebrate its full recovery, Ghosn expressed admiration for the workers whose dedication fueled a full recovery at record speed.

When I came here last time I remember very well: there was no electricity, there was no water, there was no fuel, there were barely no Nissan employees in the plant because there was nothing to do, said Ghosn, who last visited the plant on March 29.

The floor was torn, the equipment was misaligned, there were pipes hanging, and frankly it was very difficult to forecast when production would be back to where it was.

At the time of the quake, an elevator shaft for cylinder blocks had tilted, 175-kg engines had toppled from their assembly stands, and cracks had formed in the concrete floors. None of that was visible on Tuesday as machines hummed at full speed, with workers preparing for an hour of overtime.

One side of the factory floor had sunk about 15-20 cm, but steel legs and other reinforcements were put in place to correct the height of precision machinery, Hikaru Kawasumi, a manager at the plant, told journalists on a tour of the plant.

The factory was hit by a massive aftershock on April 11 -- exactly one month after the first tremor -- erasing much of the restoration that had been done up to that point.

Just five weeks later, the plant is preparing to produce at a faster pace than planned for the next three months to make up for lost production, Ghosn said.

Nissan would invest about 3 billion yen to reinforce the Iwaki factory's facilities to protect it against future earthquakes, he told reporters.

Ghosn surprised markets last week with a projection of higher vehicle sales this business year compared with the year ended in March despite a big disruption to production resulting from the disasters that have crippled the supply chain.

Analysts have said they expect the pace of recovery to be roughly similar at all three car makers.

The catastrophes in Japan came at a particularly inopportune time for Honda, which has just remodeled its popular Civic and had been counting on it to drive sales growth this year.

Indeed, Ike said it would be tough to ensure smooth supplies of the Civic in the United Sates.

(Additional reporting by James Topham; Editing by Matthew Driskill and Anshuman Daga)

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