Yesterday, Toyota (TM) briefly stunned the automotive world when it announced that it was temporarily shutting down all 13 of its U.S. plants at the end of the month. Yikes! The Japanese supply chain crisis is worse than we thought! Toyota swiftly retracted the statement, but the damage was already done.
It's still not clear what the company's plans are, and if recent history is any guide -- Toyota was less than forthcoming with information about its Great Recall of 2010 in the early stages -- then clarity is a ways off. A terse statement posted to the the Toyota website captures the firm's reticence:
We continue to assess our supply base in Japan following the earthquake/tsunami. We have communicated to team members, associates and dealers here that some production interruptions in North America are likely. It's too early to predict location or duration.Maybe it's not as bad as all that, but it's still pretty bad
What got everyone's attention on Monday was the scale of the proposed shutdown: 100 percent of Toyota's U.S. capacity. Here's the initial, controversial statement, from the news wires:
"We're going to get to a point this month where that gap in the pipeline starts to show up. So we'll have to suspend production for a while," spokesman Mike Goss said.Right now, Toyota is bleeding. It was understandably unprepared for a disaster of this magnitude, and is witnessing its U.S. market share decline precipitously. It's already been passed by Ford (F) for the number two spot and seen General Motors (GM) recapture a 20 percent share. Losing all U.S. production for a month would be a complete catastrophe, especially given Toyota's advantage in smaller, more fuel-efficient vehicles headed into what many expect will be a summer of high gas prices.
Toyota gets about 15% of the parts for cars and trucks built in North America from Japan, "but still you have to have them all to build the vehicles," Goss said.
Communicate, communicate, communicate
A spin machine, the preeminent Japanese automaker is not. Its U.S. Twitter feed is providing no additional insight into the shutdown story beyond a link to the official company statement, and its Facebook page is silent. Of course, this isn't life-and-death stuff, unlike the issues involved with the recall.
But I'd have thought Toyota would have learned how to manage crises, both small and large, better than this by now. The reality is that consumers often begin to make a car-buying decision months in advance of ever setting foot on a dealer's lot. If they show up prepared to buy a Camry and there are none, there's every chance they'll then have to purchase from another automaker because they really need the wheels.
Shutdowns are coming, so let us know how many and when
What yesterday's communications snafu indicated is that Toyota is in all likelihood going to have to idle some capacity. Maybe not the whole tamale, but perhaps more than a plant or two. The world truly is on Japan's side right now, and those customers who are loyal to Toyota will understand if they have to wait a few more months for a new Prius. But what the company now needs to do is define its exact plans and learn from the missteps of its past. Let the whole story out. It will set you free.