Toyota may modify its just-in-time system

May raise inventories to mitigate the effects of its US suppliers' fall.

Toyota Motor Corp and Honda Motor Co, Japan’s two largest carmakers, may modify their so-called ‘just-in-time’ manufacturing system to avoid possible supplier bankruptcies disrupting production.

General Motors Corp and Chrysler LLC are battling to restructure after winning $13.4 billion in emergency federal loans to keep them operating through March. Detroit’s woes could lead to a “supplier shock,” crippling US production at Japanese and other foreign carmakers, according to the Center for Automotive Research.

“We continue contingency planning” even after the bailout, Mike Goss, a spokesman for Toyota’s North American manufacturing unit in Erlanger, Kentucky, said by email. “We hope the loans provided to Detroit will also help to stabilise suppliers, but the very slow market remains a concern for all.”

The Japanese company may work with more partsmakers and increase inventories to mitigate the effects of a collapse among its US suppliers, at least half of whom also work for Detroit automakers, Goss said. US vehicle sales at a 26-year low have forced GM and Chrysler to seek government aid and left as many as a third of North American component-makers at risk of bankruptcy, according to consulting company Grant Thornton LLP.

“Partsmakers may have escaped bankruptcy filings for the next few months, but six months, a year from now, the risk is definitely still there,” said Takeshi Miyao, a Tokyo-based supply chain analyst at automotive consulting company CSM Worldwide.

1938 Adoption: Toyota fell 1 per cent to 2,905 yen at the 11 am close of Tokyo Stock Exchange trading. It has fallen 52 per cent this year.

Plunging demand in the US, the world’s biggest auto market, contributed to Toyota on December 22 forecasting its first operating loss since 1938. That was the same year the carmaker fully adopted the “just-in-time” model, according to its website. Under the system, companies avoid stocking inventories, preferring to take delivery of components as they are needed, to cut expenses.