Thai unrest spurs Honda unit to cut output and delay new plant

[May 23, 2014]  By Pisit Changplayngam

BANGKOK (Reuters) - The Thai unit of Honda Motor Co has cut production at its Ayutthaya plant to 60 percent of capacity to reflect weak domestic demand, voicing concerns sales may fall short of its target this year after months of political unrest.

Thailand's auto sector, southeast Asia's biggest, is one of the more visible victims of the weakened economy and unrest which culminated on Thursday in army chief General Prayuth Chan-ocha taking control of the government in a coup.

The sector has fired more than 30,000 subcontracted workers this year and slashed production, as sales plunge after months of political unrest that threatens to drive some manufacturers offshore.

The Japanese carmaker has also decided to delay by between six months and a year the startup of a new $530 million plant from its previously planned April 2015 date, said Pitak Pruittisarikorn, executive vice president at Honda Automobile (Thailand) Co.
 

"We have been worried about the unfavorable conditions since earlier this year, both economic and the political situation," he told reporters on the sidelines of a marketing event.

The Ayutthaya plant has an annual capacity of 300,000 vehicles, while the new plant under construction in Prachinburi will have an annual capacity of 120,000 vehicles, he said.

The production cut, which involved scrapping overtime shifts, reflects weaker demand and aims to clear unsold stock, Pitak said, adding its inventories were now back to normal.

Pitak said Honda's sales in Thailand may miss a target of 160,000 vehicles this year, while overall domestic sales are likely to fall below 1 million vehicles.

Domestic auto sales in April dropped 33.2 percent on the year, according to data from the Federation of Thai Industries.

Sales fell 7.7 percent to 1.33 million cars in 2013.

Domestic sales have declined since the ending in 2012 of a government first-car subsidy scheme, which had boosted sales 81 percent that year.

This version of the story corrects domestic sales target in paragraph 8 to 160,000 vehicles.

(Writing by Khettiya Jittapong; Editing by Matt Driskill and David Holmes)

[© 2014 Thomson Reuters. All rights reserved.]

Copyright 2014 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.