Diaoyu Islands

Japan's big three automakers scale back China production

PUBLISHED : Tuesday, 18 September, 2012, 10:15am
UPDATED : Thursday, 29 August, 2013, 4:13am

Japan’s big three automakers shuttered some or all of their factory operations in China on Tuesday amid escalating anti-Japan protests centred on a bitter territorial dispute between the Asian giants.

Honda Motor said it had temporarily closed all five of its China plants after violent demonstrations, while Nissan temporarily shut two of three factories and Toyota said it had scaled back production but did not elabourate.

“We decided to stop production at our automobile factories for today and [Wednesday],” a Honda spokesman said, adding that no decision had been made about plant restarts.

“We can produce cars in the factories, but we are concerned about delivery to the dealers,” he added.

Honda makes about 970,000 vehicles annually at its five China plants, while Nissan counts China as its biggest single market.

“From [Thursday], we will assess the situation to decide what to do,” said Nissan spokesman Christopher Keefe.

“No facility has experienced direct trouble or direct damage. [But] the safety of our personnel is the highest priority.”

Toyota, Japan’s biggest automaker, declined to offer specifics on shutdowns at its three assembly plants and six other factories, saying only that it viewed “employees’ safety to be top priority”.

Each factory “has made its own decision based on an overall understanding of situation to conduct or not conduct operations today”, a Toyota spokesman said.

“Some will operate and some will not.”

The firms’ shares were hit in early Tokyo trade as the two nations’ bitter diplomatic tussle over East China Sea islands known as Diaoyu by Beijing and Senkaku by Tokyo spooked investors.

By the break, Nissan was down 2.3 per cent at 721 yen (HK$71) and Honda was off 1.53 per cent at 2,630 yen while Toyota dipped 0.9 per cent in early trade but clawed up to 3,230 yen, or 0.46 per cent higher.

A group of Japanese business leaders headed by Toyota’s chairman said it may cancel a regular trip to China because of the dispute, while electronics giant Panasonic also said it was temporarily shutting some China operations.

Sony said on Tuesday it will close two of its seven factories in China for a day in order to ensure the safety of its staff.

The company said it plans to reopen the facilities on Wednesday. It declined to say where the plants where located to avoid them being targeted by protesters.

Japanese excavator maker Hitachi Construction Machinery said on Tuesday that it has recalled 25 of its workers from China.

The construction machinery maker sent home all 23 Japanese workers at an excavator production plant in Anhui province and two workers at its sales office in the port city of Qingdao, a spokesperson said.

The Anhui plant had been shut down on Monday as part of a two week plan to cut output due to slack demand, the spokesperson said.

The company said some workers in Beijing and Shanghai would remain.

“Obviously, it’s in everyone’s best interest to wind the tensions down, especially given Japan’s huge investments and exports to China,” said Nicholas Smith, an equity strategist at brokerage CLSA.

Widespread anti-Japanese protests, some of them violent, have been held across China in recent days over the uninhabited archipelago situated in rich fishing waters and said to sit atop valuable natural resources.

They are claimed by both Tokyo and Beijing, but controlled by Japan.

A new bout of demonstrations is expected on Tuesday, the anniversary of the 1931 “Mukden incident” that led to Japan’s invasion of Manchuria, which is commemorated every year in China.

China and Japan have close trade and business ties, with numerous Japanese companies investing in their larger neighbour and two-way trade totalling US$342.9 billion last year, according to Chinese figures.

But the two countries’ political relationship is often tense due to the territorial dispute and Chinese resentment over past conflicts and atrocities.

The row over the islands intensified last week when the Japanese government bought three of them, effectively nationalising them, and China responded by sending patrol ships to nearby waters.

Additional reporting by Reuters in Tokyo