Toyota’s flood damage: CMH says production down for at least 12 weeks

The expansive Prospecton production plant of Toyota South Africa Motors (TSAM), south of Durban, will “be down” for a minimum of 12 weeks because of damage caused to the facility following the recent KwaZulu-Natal floods, says JSE-listed vehicle retailer Combined Motor Holdings (CMH).

CMH CEO Jebb McIntosh made the comment during a presentation on CMH’s latest annual financial results, released this week.

“The Toyota factory is down for, we believe, a minimum of 12 weeks,” he said.

“That is going to take quite a big chunk out of the South African market because they are the biggest supplier….

“The dealers will not get stock in those particular models for the next 16 weeks because if they are out for 12 weeks, it will take them four weeks to replenish the stock supply,” explained McIntosh.

The ‘particular models’ McIntosh was referring to are the Hilux, Corolla Cross, Quest, Fortuner and Hiace Ses’fikile –  all of which are produced locally at the Prospecton plant.

Production at the plant has been suspended since April 11 2022.

Metair impact

A major supplier to TSAM, JSE-listed automotive company Metair Investments last week declined a Moneyweb request for an interview on the impact of suspended production at the Toyota plant on its operations. However, on Thursday morning Metair issued a Sens statement related to the impact of the KZN floods.

It confirmed that it has now initiated a business interruption claim to limit the impact to Metair’s Automotive
Components vertical’s earnings because of the floods and the impact on a major original equipment manufacturer (OEM), without naming TSAM.

“While the impact on Metair’s facilities was minimal and operations had promptly returned to normal, a major OEM customer of the group advised that it suffered significant damage to its plant with production suspended for clean-up operations and assessments to be carried out,” it said.

“There is no certainty yet on the timing of production coming back online but Metair’s Automotive Components Vertical expects a material reduction in demand for its products until then.”

“Metair has insurance in place and has initiated a business interruption claim which would limit the impact to the Automotive Components Vertical’s earnings,” the group added.

“Metair will also work with the affected OEM to support their recovery and any recoupment of lost production… Metair is in close contact with its funders to maintain sufficient short-term liquidity until the situation stabilises,” it pointed out.

Moneyweb reported earlier this week that a senior executive of a local-based vehicle manufacturer claims production at the Toyota plant will only resume in about four months, following the extensive flood damage.

The executive, who did not want to be named, said the floods had caused an estimated R2.8 billion in damage to TSAM’s plant.

TSAM has not responded directly to a request from Moneyweb to confirm or deny these claims and to a number of other questions.

TSAM on Friday indicated that it is still unable to confirm when production will resume at its plant.

The auto giant said it is currently implementing a systematic and meticulous phased plan to return its Prospecton plant to working condition after suffering extensive flood damage in April. It noted that this approach is designed to ensure a safe start-up, without any potential secondary issues.

The company added that clean-up operations are progressing at a pace in different areas, with the first three phases including:

• The establishment of temporary utilities at the plant,
• Cleaning up, and
• Powering up the machinery.

TSAM said that once the trial power-up stage is reached, certain areas of the facility will then be able to move to phase four, which involves an accurate assessment and equipment check.

Andrew Kirby, the President and CEO of TSAM, said it is only once it commences with this phase that it will “be able to adequately judge the realistic lead time to resume production”.

“As you can imagine, there will be a mountain of repairs to be made along with many parts that will need to be ordered. It would therefore be irresponsible of us to call a start-up date until we have the full picture,” added Kirby.

“We anticipate firming updates within the next week,” he said.

This article first appeared on Moneyweb and was republished with permission.
Read the original article here.

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