Japanese automotive components supplier Denso has reduced worldwide production volume by around 50% due to the outbreak of the coronavirus, and added that its supply chain could be affected in the coming months if the situation is prolonged, it said in a statement.
Denso posted an 81% drop in operating profit to US$571 million (RM2.47 billion) for the year ended March 31, marking the company’s lowest since 2009, according to Reuters. This reflected the steep drop in demand for vehicles as most people have been ordered to remain indoors in order for governments to control the spread of the coronavirus, it said.
“It will take considerable time for economies to recover to pre-coronavirus levels. This will be a long-term battle; the industry is fighting for its survival,” chief executive officer Koji Arima said during a briefing. Fellow Toyota group automotive supplier Aisin Seiki also went the same direction, charting a 73% drop in full-year profit to US$525.4 million (RM2.27 billion).
The approximately 50% reduction in Denso’s global production was attributed to plant stoppages in North America, Europe and Asia, and although the firm does not foresee any major bottlenecks in it supply chain, it may have problems obtaining supply of parts if plant closures continued into June and beyond, it said.
Denso declined to issue a financial forecast for the current final year, Reuters reported, as the parts manufacturer cited uncertainty regarding the impact of the coronavirus upon the industry. Toyota, which holds nearly a 25% stake in both Denso and Aisin, had recently repurposed some of its operations to support care and recovery efforts from the coronavirus.
As a whole, the automotive industry is expected to see global vehicle production drop by more than 20% to around 71 million units due to the pandemic, which translates to 19 million units in lost production this year, a decline much greater than anticipated earlier in the year. Manufacturing plants in the United States are trading car production for making medical equipment, while Europe has similarly repurposed some of its car manufacturing for respirator parts production.
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