System Failure Forces Toyota to Suspend Production in Japan

Toyota Motor Corp, the world’s largest automaker by sales, announced on Tuesday that it will halt operations at all of its 14 assembly plants in Japan due to a malfunction with its production system. The suspension is likely to affect almost a third of Toyota’s global output and disrupt its recovery from the semiconductor shortage.

What Caused the Malfunction?

According to a Toyota spokesperson, the malfunction occurred on Monday night and prevented the automaker from ordering components from its suppliers. The spokesperson said that the cause of the problem was still under investigation, but it was “likely not due to a cyberattack”.

System Failure Forces Toyota to Suspend Production in Japan
System Failure Forces Toyota to Suspend Production in Japan

The spokesperson added that Toyota was working to resolve the issue as soon as possible and restore normal operations. However, it was unclear when the production would resume and how much output would be lost.

How Will the Suspension Impact Toyota’s Business?

The suspension comes at a time when Toyota’s domestic production had been on the rebound after a series of reduced output plans due to the global chip shortage. In the first half of the year, Toyota’s production in Japan increased by 29%, the first such rise in two years.

Toyota’s domestic plants account for around a third of its global production, according to Reuters calculations. The plants produce various models, including hybrids, electric vehicles, minivans, and trucks. Some of the plants also export vehicles to overseas markets.

The suspension could affect Toyota’s sales and profits in Japan and abroad, as well as its supply chain and inventory levels. It could also give an edge to its rivals, such as Honda and Nissan, who have been struggling to catch up with Toyota’s strong performance amid the chip crisis.

How Has Toyota Handled Previous Disruptions?

Toyota is known for its efficient and lean production system, which minimizes costs and wastes by keeping inventory levels low and ordering parts only when needed. However, this also means that any disruption in the logistics chain can have a significant impact on its operations.

Toyota has faced several challenges in recent years that have affected its production, such as natural disasters, labor strikes, trade disputes, and cyberattacks. In each case, Toyota has tried to mitigate the damage by shifting production to other plants, using alternative suppliers, or adjusting its output plans.

Last year, Toyota’s operations were disrupted for a day when one of its suppliers was hit by a ransomware attack. The incident caused an output loss of around 13,000 vehicles. Toyota said at the time that it had taken measures to prevent similar attacks in the future.

What Is the Outlook for Toyota and the Auto Industry?

Despite the current setback, Toyota remains one of the most resilient and profitable automakers in the world. In July, Toyota reported a record quarterly operating profit of $9.15 billion, beating analysts’ expectations. It also raised its full-year forecast for vehicle sales and earnings.

Toyota has also been investing heavily in new technologies and products, such as hydrogen fuel cells, autonomous driving, and mobility services. It aims to achieve carbon neutrality by 2050 and become a leader in the transition to a low-carbon society.

However, Toyota also faces many uncertainties and challenges in the global auto industry, such as the ongoing chip shortage, rising raw material costs, environmental regulations, consumer preferences, and competition from new entrants. Toyota will need to continue to innovate and adapt to stay ahead of the curve.

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