Japan’s Toyota, Honda Can Likely Cope With Global Chip Shortage
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The global semiconductor chip shortage is not likely to significantly affect the financial profiles of Japan’s Toyota Motor Corp or Honda Motor Co, ratings agency Fitch said in a statement on Wednesday. The automakers have enough financial flexibility to absorb more costs and maintain significant rating headroom, even if the shortage persists till the second half of 2021, according to the statement.
The automobile industry has been grappling with a shortfall in chip supply since the end of last year, driven by coronavirus lockdowns in Southeast Asia and bulk-buying by U.S. sanctions-hit Chinese tech giant Huawei Technologies, among other reasons.
The shortage prompted top U.S. automaker General Motor to extend production cuts at three North American plants last week, while Honda Motor and Nissan Motor were set to sell a combined 250,000 fewer cars in the current financial year.
Toyota and Honda have enough financial flexibility to absorb more costs and maintain significant rating headroom
Meanwhile, Toyota shrugged off the issue in its quarterly report last week and said it has up to a four-month stockpile of chips, with no immediate hit to production expected.
“We believe the shortage should ease or even be resolved in the second half of 2021 as suppliers boost production for automotive clients,” Fitch said.
Top economic and national security officials in the White House have launched a new effort to help the U.S. auto industry fight the chip shortage, a White House official said on Thursday.
The issue could impact nearly 1 million units of global light vehicle production in the first quarter, according to data firm IHS Markit.
Questions & Answers
Q.Why are Toyota and Honda expected to cope with the chip shortage better than some other manufacturers?
Why are Toyota and Honda expected to cope with the chip shortage better than some other manufacturers?
Fitch states that both companies possess sufficient financial flexibility to absorb additional costs. They also have significant rating headroom, allowing them to manage the situation even if the shortage continues through the second half of 2021.
Q.What specifically helps Toyota to manage the current chip supply issues?
What specifically helps Toyota to manage the current chip supply issues?
Toyota has reported having up to a four-month stockpile of chips, meaning it does not expect an immediate impact on its production levels. This strategic reserve provides a buffer against the current supply challenges.
Q.What factors have contributed to the global semiconductor chip shortage?
What factors have contributed to the global semiconductor chip shortage?
The shortage has been driven by coronavirus lockdowns in Southeast Asia and bulk-buying by the U.S. Sanctions-hit Chinese tech giant Huawei Technologies. These factors have led to a shortfall in chip supply since late last year.
Q.When is the chip shortage predicted to ease or be resolved?
When is the chip shortage predicted to ease or be resolved?
Fitch believes the shortage should ease or even be resolved in the second half of 2021. This expectation is based on suppliers boosting their production specifically for automotive clients during that period.
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