TOKYO: Toyota faced the prospect of a further downgrade on Wednesday, as the world's largest automaker said it did not know when most of its domestic assembly plants could resume after the March 11 quake. Ratings agency Moody's said it placed Toyota's Aa2 rating, the third highest on a scale of 19, on review for a possible downgrade, one month after Standard & Poor's cut its rating on the automaker.
Moody's cited the impact of the earthquake and the devastating tsunami it unleashed, which led to power shortages and supply chain disruptions on Toyota's production, which it warned would not return to normal for "months". It also cited the automaker's dependence on a Japanese market expected to be hit by weak consumer sentiment following the disasters. While the Japanese giant has resumed production of its Prius and some Lexus hybrid models after the magnitude 9.0 earthquake, the largest ever recorded in Japan, the supply of around 500 key components has been hit, Moody's said.
"The shortage of even one component can significantly disrupt production," Moody's said. "Normal production cannot be expected for many months." Three domestic assembly lines are operating but Toyota said it did not know when it could restart 16 idle plants in Japan, a Toyota spokeswoman said. Spokeswoman Shiori Hashimoto denied a Nikkei report that the automaker will restart most of its assembly plants in the country as early as next week.
"It is not so optimistic at this moment," Hashimoto said. The impact has been felt worldwide. Toyota said it would be forced to slow production at some US plants due to a shortage of parts from Japan. Moody's said the automaker was particularly exposed in terms of its thin operating margins in comparison to its peers, with quality-related expenditures high as it looks to recover from the impact of millions of recalls. It said that a declining share in major markets and higher spending on customer incentives indicated weaker consumer perceptions of the brand's quality, which would be exacerbated by the lack of availability of key models. The latest setback for Toyota comes as the world's biggest automaker attempts to rebuild a reputation damaged by millions of recalls worldwide over safety issues. Previously lauded for its safety, Toyota became mired in crisis when it recalled nearly nine million autos between late 2009 and February last year due to brake and accelerator defects alleged to have caused dozens of deaths. The crisis dealt a huge blow to the firm's reputation, prompting predictions it would lose market share as it tightened its recall policy to encompass around 16 million vehicles between late 2009 and January this year.
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