Production slowdown will hurt small parts firms soon (Thailand)

Posted on 29 April 2011

Source: Bangkok Post

Local automobile parts suppliers will face serious trouble as the impact of production cutbacks by major carmakers starts to take hold, warns the Federation of Thai Industries (FTI).


The slowdown in the industry is already hitting third- and fourth-tier suppliers, mainly local producers of microchips and electronic parts for vehicles, said Suparat Sirisuwannangkun, an FTI vice-president.


Most of the affected companies are small and medium-sized companies and some may have to start laying off workers soon, he added.


Recently announced production cuts follow the suspension of overtime shifts by many carmakers in Thailand that have been unable to obtain crucial parts, mainly electronic components, from Japan in the wake of the March 11 earthquake and tsunami there.


Industry Ministry officials and automotive executives said the production cuts would range from 20-70% of normal vehicle output, depending on the com pany and remaining parts inventories, and would last at least until June 30.


The industry has estimated a loss of 150,000 new vehicles over the next two months, resulting in financial damage of 75 billion baht.


Mr Suparat said that half of the 1.2 million employees in the Thai automobile industry, the largest in Southeast Asia, worked for third- and fourth-tier parts companies.


The Industry Ministry will discuss the issue next week with a view to helping SME suppliers, though officials expect normal operations in the industry to resume in the second half this year.


Mr Suparat said current conditions in Japan were prompting some auto parts firms in that country to consider relocating plants outside Japan, with Thailand regarded as their first choice.


''We have seen moves by industrial estate operators in Thailand such as Rojana and Amata to approach Japanese auto parts companies to set up plants at their estates,'' he said.


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