Toyota Slashing September Production By 40%, Sparking Stock Crash And Risk Off Rout

Toyota stock plunged, global markets were hammered and Tokyo stocks closed at a 7-month low after the Nikkei reported that Toyota would slash global production for September by 40% from its previous outlook. The production cut – result of the pervasive global chip shortage which has crippled supply chains – will reduce Toyota’s global production for September from 900,000 automobiles to 500,000.

As a result, Toyota’s global production for the month well be below that of last September, when demand was beginning to recover from the initial stages of the coronavirus pandemic and Toyota turned out 840,000 units.

The production cut, which amounts to just about 350,000 units, means the auto giant will temporarily suspend production lines at multiple domestic factories, including its Takaoka plant in Aichi Prefecture, starting early next month. Production in North America, China and Europe will also be scaled back by tens of thousands of units, resulting in widespread furloughs.

Toyota from late July to early August had already halted assembly lines at some Aichi factories, including the Tahara plant, due to a surge in COVID-19 infections in Vietnam, which put a strain on supply chains and made it difficult to procure parts. The company also temporarily suspended some of its production lines at its Takaoka plant earlier this month due to the chip shortage. -Nikkei 

The news sent the company stock and its suppliers plunging, with Toyota shares tumbling more than -4%…

…  while Aisin dropped -5.8%, and Toyota Tsusho slid -4.6%.

The news also hammered the broader Nikkei225, which ended down 1.1% from Wednesday at 27,281.17, the lowest level since early January.

S&P futures were also hit on the news, and after trading somewhat calmly if subdued before the news, when they were just below 4000, they have since tumbled almost 50 points, sliding as low as 4,347 before staging a modest bounce.