Thai floods curb production of cars, electronics

BANGKOK (AFP): Thailand’s worst floods in decades have jolted a global supply chain already straining under the impact of Japan’s tsunami, as deluged factories threaten some of the kingdom’s key export industries.

The floods have killed about 300 people, damaged one-tenth of Thailand’s rice paddy and made major roads north of Bangkok impassable.

Toyota, Ford, Honda and Isuzu have all suspended car assembly in Thailand, a regional automotive hub -- a move expected to hit output of thousands of vehicles.

While most of the country’s auto factories are on the eastern coast, outside the worst affected zones, a clutch of large industrial parks north of Bangkok home to plants producing vital components have been inundated.

Electronics firms are also braced for a slowdown in output, with US groups Seagate Technology Inc. and Western Digital Corp. warning their production of hard disk drives would be hit by the disaster.

Chipmakers ON Semiconductor Corp. and Microsemi Corp. as well as high-tech gaint Nikon have suspended output at Thai factories, while Canon Inc. said it would temporarily move ink jet printer production to Vietnam.

The disruption is another setback to Thailand’s crucial export sector, which was still recovering from the impact of parts shortages caused by the March earthquake and tsunami disaster in Japan.

The effects of the latest disruptions will be felt outside Thailand, said the chairman of the Federation of Thai Industries, Payungsak Chartsutthipol.

“This has also affected factories abroad because many plants in Thailand are suppliers for factories outside Thailand,” he told AFP.

“It’s like the impact from the tsunami in Japan earlier this year which also had an impact on factories in Thailand because of a shortage of parts.”

Outside one Honda plant in Ayutthaya, about 80 kilometres (50 miles) upriver of Bangkok, rows of cars have been almost totally submerged by the muddy water, while others were moved to an overpass to keep them dry.

Toyota on Friday said it would extend the production halt in Thailand until at least October 22.

“2011 has been a terrible year for Japanese automakers and natural disasters. The earthquake and tsunami in Japan absolutely broadsided them by forcing factory closures for nearly two months. And now the floods have stymied production in Thailand,” said Hans Greimel, Asia Editor at Automotive News.

“Thailand is a key production hub for Japanese automakers, particularly Toyota and Honda. And they will be hurting from the disruption, especially as they lean on overseas plants to help make up some of the production losses they suffered at home,” he said in Tokyo.

An expatriate working for a spare-parts maker in Thailand said a major auto maker recently asked his company to help provide some spare parts from another country.

“That means that they think the supply will be disrupted for a while,” he said, asking not to be named.

Forecasters at the University of the Thai Chamber of Commerce have estimated the total cost of the floods to the Thai economy at about 150 billion baht ($4.9 billion) -- roughly 1.3-1.5 percent of annual gross domestic product.

The figure includes estimated damage to farmland, tourism and commerce.

“If Bangkok is flooded too, the loss will definitely be more,” said Thanawat Polwichai, head of the university’s Economic and Business Forecasting Centre.

Authorities in the capital have expressed confidence that they can protect the city of about 12 million people from major flooding.

The Thai economy recovered quickly from the impact of two months of deadly political protests in Bangkok in early 2010, but was squeezed by the fallout of Japan’s twin disasters in March this year.

The governor of the Bank of Thailand signalled Friday that the central bank is likely to lower its 2011 economic growth forecast later this week, from the current level of 4.1 percent, and independent experts are also cautious.

“Japan’s experience of a fairly swift output recovery following the March tsunami does offer some hope, but Thailand’s experience may be less fortunate,” analysts at the British consultancy firm IHS Global Insight warned in a report.

“Not only is the area affected much larger, but a whole swathe of sectors are suffering the effects,” they added.