Honda's Alliston, Ont., engine plantDeborah Baic/The Globe and Mail
Honda Motor Co. Ltd. is cutting production of vehicles indefinitely in Alliston, Ont., and its other North American plants - the first major hit for the auto industry in Canada and the United States from the crisis in Japan.
Starting Wednesday, output at Alliston will be cut to 300 cars and sport utility vehicles a day from more than 700 as the auto maker grapples with parts shortages.
There have been sporadic and short-term shutdowns at some auto makers and curtailment of overtime at Toyota Motor Corp. plants and others, but Honda is the first to enact a system-wide production cut in North America.
"This temporary production adjustment will be effective throughout North American Honda plants," Jerry Chenkin, executive vice-president of Honda Canada Inc., said Tuesday.
The parts shortage comes at a particularly inopportune time for Honda. It is gearing up Alliston and a plant in Greensburg, Ind., to produce the redesigned Honda Civic compact, which is the company's best-selling vehicle in Canada and is enjoying a sales boost in the U.S. market as gas prices surge. The new version of the Civic is scheduled to go on sale in Canada on April 20, Honda said at the Vancouver Auto Show on Tuesday.
The production cuts may also foreshadow more pain to come in the sector as Japanese auto manufacturers and parts makers struggle to get back on their feet after the devastating earthquake and tsunami on March 11. As a result of the crisis, global vehicle output could decline by as much as two million vehicles from an expected level of nearly 80 million this year, said industry analyst and consultant Bill Pochiluk, president of AutomotiveCompass LLC of West Chester, Pa.
In Honda's case, the production cut is caused by a potential shortage of parts from Japan, said Mr. Chenkin, who declined to identify what components are most at risk.
"What they're trying to do is maintain some level of production," he said. Honda will not lay off any workers in Alliston.
The vast majority of the parts that go into Honda vehicles assembled in Alliston, Greensburg and at assembly plants in Ohio and Alabama are shipped from North America.
But the impact of the earthquake, tsunami and nuclear crisis on some Japanese plants that make microprocessors and other small electric components is expected to reverberate throughout the global auto industry once existing supplies have been used and ships now at sea deliver parts made before the earthquake hit.
"It's a lot of electrical components like switches and relays," said a source at one Japan-based auto parts maker with operations in North America.
There are reports from U.S. dealers of vehicle shortages, notably Toyota's Prius hybrid sedan, but Canadian dealers said they are well-stocked. One dealer in Western Canada said he still has 2010 models available.
Sales figures for Prius in Canada and the U.S. differed dramatically in the first two months of 2011. U.S. Prius sales soared 47 per cent, while Canadian purchases plunged 53 per cent.
"Inventory at Toyota, Lexus and Scion dealerships across Canada remains generally good, with a complete selection of vehicles available to customers for the spring market," Toyota Canada spokeswoman Sandy Di Felice said.
Toyota Motor Sales USA warned dealers Tuesday that supplies of some replacement parts are being rationed. Canadian dealers had not received a memo on that subject, but were told to restrict the use of Toyota Genuine Motor Oil 0W-20 to select vehicles.
"There is a risk we may experience a short supply of Toyota Genuine Motor Oil in the coming months until mid-August," Toyota said in a memo to Canadian dealers.
That's because it contains an exclusive additive made by Adeka Corp. of Japan, whose facilities were damaged by the earthquake and the tsunami.
In a submission to securities regulators Tuesday, Toyota said the crisis may cause "a significant impact on production capabilities" of some vehicles.