Honda’s plant in Thailand had been submerged for months. Now that the flood waters have finally retreated, Honda assesses the damage. The plant is a near write-off.
“The restoration work will almost be equal to making a plant from scratch,” a Honda executive told The Nikkei [sub]. Honda decided to completely rebuild the plant located in the Rojana Industrial Park in Ayutthaya Province, central Thailand, at a cost of around $650 million.
Honda was the only Japanese automaker that was directly hit by the flood, and it was hit severely. Other carmakers in Thailand and around the world experienced outages due to waterlogged suppliers.
As a result, Honda is looking at spending more money to restore operations in Thailand than any other Japanese company. The plant has an annual production capacity of 240,000 units.
…on the bright side, none of the windshield wipers were damaged.
Well, they say (inaccurately)that lightning never strikes the same place twice, but floods surely do. If they have to build from scratch, wouldn’t Honda at least consider building on higher ground?
Building on higher ground would involve Admitting A Mistake — something Honda, and Japanese leaders in general, will go to any length to avoid.
See: 2012 Civic. And/or demise of Integra/RSX. And/or the ‘power plenum’ Acura grille. I’d better shut up now. :)
See: Early 80’s fuel filler neck corrosion contaminating fuel systems, minivan power door failures, endless transmission failures, vibration, steering, ….
Not so fast there Detroit-X. I just replaced a fuel filler neck on a late nineties GM W body…and the brake lines…all due to corrosion. Seems that corrosion of these undercar parts on these models is rampant…and it extends into early 2000’s…
If they have to build from scratch, wouldn’t Honda at least consider building on higher ground?
I would presume that their options are limited, aside from leaving altogether. They need to be near labor, suppliers and a port, and the automotive industry there is concentrated in a fairly small area.
Flooding of that magnitude is unusual. It could be decades before something like this happens again. It probably makes more sense to stay put.
It is hard to understand why anyone builds anything that they are not willing to lose on a flood plain.
sure a place on the river that might be a good home might last 20 years with luck even if it is on a lot with a 5 year flood risk…. but to assume “we just had the 50 year flood event so we will be fine for the next 49 years is not showing a solid understanding of how floods occur. and for $650,000,000 plant it verges on the insane… if as you say they have to put it there rather than on high ground then make your one high ground or build it on pilings or protect it with dikes. I bet the cost of doing so would be returned in lower flood insurance rates in less than 20 years (that is assuming that some insurance outfit would write such a policy for less than $100,000,000 a year,,,, though I would not be amazed if a company like Honda carries its own risk)
for $650,000,000 plant it verges on the insane
During FY 2010, Honda’s revenue in Asia (Indonesia, Thailand, China, India, but excluding Japan) was over a trillion yen. Convert that to US dollars using the exchange rate of the time (let’s say an average of 90 yen: $1), and you have over $11.5 billion in revenue.
$650 million for a plant is less than 6% of regional revenue. If they self-insured, then they should be able to pay for it with about one year’s worth of regional profit. For a company of that size, it’s a bit of a hit but really not that big of a deal.
We check flood records and perhaps even survey the place during heavy rain when buying a home, why didn’t Honda do it when building million-dollar plants? They should survey the site during a monsoon!
Why build in Thailand AT ALL? They would be better served to import from China (since the Yen is so crazy). Unless the import tariffs are just that outrageous. Wiki data on Dongfeng Honda is sketchy, and i’m not sure of how many units they produce, but wouldn’t it just make more sense?
Ok, sure, 240,000 units a year is nothing to shake a stick at, but still.
Having a Thai plant just seems like overkill to me, IDK.
Why build in Thailand AT ALL?
Because it is a growing, but protected market. Even though there is an ASEAN trade pact, cars are excluded from it.
The Japanese dominate the market there. Import tariffs on vehicles range from 40-80%, plus the sales tax on vehicles is calculated based upon the after-tariff price, so the tariff itself is also taxed.
Most countries that have domestic auto industries work hard to protect them, since they provide relatively high wage employment for those with working-class educations. Leaving would be a considerable mistake.
Concur. And I’m sure they’ll incorporate some flood control measures in any rebuilding effort. One of the real problems in Thailand is the poor transportation network. Heavy industry currently must be clustered near port facilities as the rail network is horrible. While highways are good near Bangkok and along the coast, they are limited and crowded heading up-country.
Why build in Thailand at all? Another reason is that labor is cheap there, and the workforce is well educated compared to many other low-wage countries. One of the new Government’s campaign planks was to impose a minimum wage of 300 baht per day. At today’s exchange rate, that is just under $10 per day.
Not to forget the number of Free Trade Agreements the Thais have in place. Most of the Hondas and pick up trucks sold in Australia are made in Thailand due to the zero tariffs they attract here.
or they could elevate the floor of the factory high enough..
Right on. Just what I was about to say.
Just lay down a concrete foundation. Build 30 feet tall concrete walls on all four sides. Fill the inside with rock and dirt. Pour concrete again at that 30 feet mark to form the floor of the plant. Build stuff on that and do proper grading. May cost $10M to do. But that’s only small change as compared to the potential damage.
But I bet Honda management won’t be that smart.
It would cost a whole hell of a lot more than $10M to raise an automotive plant 30′ in elevation.
“new” Hondas cheap…coming soon to Ebay…Salvage title is just a clerical error.
Maybe if they put some plants in a place that doesn’t flood like say…DETROIT… they wouldn’t have these problems.
I HAVE NO SYMPATHY FOR EM. In fact, Hondas are part of the reason I get to work late. Slow pieces of crap in front of me on the road.
In my city, it’s the German junk that slows me down. When I encounter a big traffic jam in winter, 50% chance is that a car is stalled at an intersection. 50% of that is caused by a BMW.
Well, I don’t have a BMW and the engines in my cars are anything but slow.
Ha – yeah, it’s slow hondas that make you and your “anything but slow” cars late for work. Because, really, having the POTENTIAL to go fast is what makes you quite the virtuous one in a crawling congested expressway at rush hour. How far do you need to drive to get to work? If it’s less than about 300 miles, no amount of lane changing or engine displacement is going to get you there more than about a minute and 45 seconds faster than anyone else. Same thing if you’re driving stoplight to stoplight.
In fact, I would guess fast and impatient drivers are far more liable for slow speeds for everyone else than the slow honda following the slow truck following the slow buick.
You want to know why you are late to work? Two reasons:
1. your poor planning/time management skills
2. ratio of people to cars approaching 1.0
I’m glad I’m not you – it must be frustrating to have a fast car on your way to work creeping in a gridlocked sea of slow, cheap cars that don’t even deserve to share the same pavement. Maybe people with fast cars who need to prove something to total strangers should be the only ones allowed to use the roads. That would be a much more entertaining experience.
Hmmm…most stalled cars I see in my area are crappy Grand-Ams. I’m stunned anyone bought that ‘Murrican POS.
The margin on the cars the new plant produces will pay for it in about 2 years. I feel sorry for them, but financially it’s not that big of a loss.
Will there be anything on the cars that are salvageable ? Wheels and tires?
Or will all of them need to be destroyed for Insurance purposes?
Glass and alloy wheels are all I can think of. Even then, there might be laws preventing re-use of any materials.
See: Hurricane Katrina. To this day the dealer I work for is hesitant about taking trades from the Gulf of Mexico coast circa 2005 (despite having ‘clean’ titles).
Sadly, virtually all will be fully destroyed. A number of years ago a transport ship full of Mazdas had listed badly and took on a lot of water. Many cars were submerged, but quite a few were not. Of the dry ones, some had fluids leak out, etc. but certainly were easily fixed. Mazda took all the cars and detonated the airbags in place and then cut them up for scrap. Even the tires and rims were purposely destroyed. I could not believe the shameful waste. If Mazda was worried about selling them as new, or even as salvage I could understand that. But why not donate them to technical schools for training purposes? Don’t know. So, don’t expect a flood (sorry) of factory Honda parts to be hitting eBay soon…
I wonder if Honda is under water on the payments on this building. D’oh!
New Orleans.
Emotion supersedes logic.
Build below water level.
Mississippi River alone can flood the place.
“Oh no, can’t relocate!!!!!”
Sick society. Sick culture. But, that’s “par for the course.”
Idiotic humans rebuild where previous calamities caused mayhem.
Aside volcanoes.
Astride active earthquake faults.
Over and over.
Such a foolish emotion-laden species.
Assuredly to be declared “wanting in the balance” and removed by whatever galactic organization wants to remove pestilence before it spreads… and rightly so.
Just hope they do it quickly.
I hate pain.