Toyota South Africa Motors (TSAM) does not envisage any job losses at its plant owing to the countrywide shutdown to prevent the spread of Covid-19, says CEO and president Andrew Kirby.

However, there are some concerns regarding the health of the automotive industry supply chain.

“My bigger concern is on the supply side, especially with smaller tier two and three suppliers which may not be able to weather this period, especially if there is a long extension of the lockdown,” says Kirby.

“I think we are right on the cusp of what we can endure.”

“And, there may be some job losses in our supply chain and that is a concern to me.

“If we look at [TSAM’s] manufacturing operations, we have to look at our total value and supply chain. We are putting a lot of emphasis on our suppliers . . . because if one of the suppliers closes down, it affects our operations.”

TSAM’s Durban plant, which produces Hi-Ace, Corolla Quest, Fortuner, Hilux and Hino models, has halted production since the start of the lockdown on March 26.

To date, the plant has lost production of just under 13 500 units. 

The local arm of the Japanese manufacturer originally planned for yearly production of between 135 000 and 150 000 units, with this number now expected to decline by between 15% and 20%.

Kirby notes that TSAM does not know exactly when the plant will be able to start up again, “and at what pace”.

“We are looking at a number of scenarios, including a staggered approach as indicated by the President [Cyril Ramaphosa].”

TSAM employs 7 251 people.

“We have secured full pay for all of our staff during the lockdown period. Those in a position to work remotely has been doing so at full speed,” notes Kirby.

Kirby adds that it is difficult to quantify the monetary loss owing to the shutdown. 

“It’s not just the value of the lost production or the lost sales, it is also the fact that our workforce have been idle for the last few weeks.

“We do know that the economic impact on the automotive sector is quite substantial and it’s not just around manufacturing. It has also struck at the very heart of our business, which is selling cars.”

STARTING UP AGAIN
Assuming lockdown is lifted on May 1, as seems the current plan, TSAM has put a number of measures in place to ensure employee safety when work resumes, says Kirby. 

These include putting special physical distancing mechanisms, ensuring that all employees have masks, screening all employees for signs of illness, as well as implementing industrial sanitation at the company’s Durban operations.

“There is a lot of work to be done to prepare our employees to return to work and certainly that won’t happen very quickly,” says Kirby.

“We’ll probably end up with a phased approach to the start of manufacturing. It will take us a number of weeks to stagger our production; to start various areas in a step-by-step mechanism.”

Kirby emphasises that TSAM would like to start up its export operations as soon as possible.

“As Toyota, we’ll continue to export. As soon as we have the opportunity to move our vehicles from our factory to the port, they will be shipped out.”

Demand may, however, be dampened.

“We have three demand sectors, the one being the South African market, the other being Europe as our largest export destination, and the third one being [the rest of] Africa,” explains Kirby.

“Broadly speaking we have seen about a 15% cut in our European export orders. For Africa, the cut has been about 10%, but we think that will go up to between 15% and 20%, with a similar range in South Africa.

“Europe is the main export destination for a large number of South African [vehicle manufacturers] and we all know what is happening in Europe.”

Kirby does not anticipate any problems in global and local parts supply to the Durban plant, should the entire logistics chain prove functional.

“When we start up there will be no delay for us in getting parts into our production facilities. But, when we do start up, [efficient] port operations will be absolutely critical for the whole country.”

He adds that TSAM is working with its dealer network to ensure that its dealers are also ready for the start of operations.

“We are gearing up for business, whatever shape or form that may take. Of course, our top priority remains the welfare of our customers and our employees.”

RISK TO LOCAL CONTENT
The longer it takes for the South African automotive industry to move back into production, the more risk there is of harm to the supply chain.

“When I think about the supply chain, the higher risk is not the manufacturing facilities we have, it’s further down the supply chain, especially tier one and two manufacturers,” says Kirby.

“If we remain too long in lockdown and we are not able to get volumes up, there is a risk that some of those parts will be re-sourced back to other countries and we may then lose that local content.

“That will obviously be a setback for us and that is something we all have to work very hard to try and prevent.”

APDP DELAY?
Government’s new automotive industry support policy, a revised Automotive Production and Development Programme (APDP), was set to kick off on January 1, 2021.

However, says Kirby, the discussion with government now is around possibly postponing that to the beginning of July.

The new APDP places a much stronger emphasis on local content.

NEW GLOBAL SCENARIOS
Looking at global scenarios during and following the outbreak of Covid-19, Kirby notes that many companies are now reconsidering their global supply chains.

Covid-19 laid bare the rest of the world’s dependence on China as a manufacturing supply source.

“I think there will be some significant changes to that in future, where those components made in China will perhaps be manufactured in other parts of the world.

“We need to think how we have risk mitigation plans in place and to not be too reliant on one country or region for the production of a single component.”

LIGHT IN THE TUNNEL
“In South Africa we have been through a number of crises; we know how to deal with this,” notes Kirby.

“We need to keep our feet on the ground and we really need to be pragmatic and take care of our customers and our employees. We need to have a strong faith that business will take care of itself after that.”

Kirby adds that TSAM is not “in a period of panic”.

“The consequences are going to be very, very severe, but we see a light at the end of the tunnel and we can only do the best we can on a day-to-day basis and hopefully the results will follow.”