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Electronics, autos take a soaking

California-based Western Digital, the world’s largest hard-disk drive (HDD) maker, expects its exports from Thailand will decrease by 40% this year due to the severe flooding.

The company estimates a two-month production halt and then another four to six months to resume full operations, said Suwat Liptapanlop, a former deputy prime minister who chaired a meeting yesterday between the Industry Ministry, the Board of Investment (BoI) and Dave Rauch, Western Digital’s senior vice-president for global operations.

“Thailand’s export value could dip by 80 billion baht from this company alone,” said Mr Suwat.

Western Digital has invested 400 billion baht in its local factories.

The widespread disaster has resulted in manufacturing being suspended at the company’s factories in Ayutthaya’s Bang Pa-in Industrial Estate and Pathum Thani’s Nava Nakorn Industrial Estate.

Employing 40,000 workers, the Thai unit accounts for 60% of the parent company’s worldwide HDD sales.

Competing closely for global leadership with California-based Seagate Technology, Western Digital supplies one-third of the world’s HDDs.

“Western Digital asks the Thai government to help move its machinery out of the affected factories to other plants in order to minimise the impact on production,” said Mr Suwat.

The flooding has also forced major carmakers including Toyota and Honda to halt production due to a shortage of parts and other supplies.

Mazda Motor Corporation yesterday said it would halt passenger car production in Thailand from today until Saturday due to a parts shortage.

Spokesman Yuta Tanaka said by telephone from Hiroshima that passenger car production on the evening shift had been suspended since last Thursday and all pickup truck manufacturing since Oct 11.

Atchaka Sibunruang, the BoI secretary-general, said her agency would ask its board for permission to offer the maximum investment privileges to flood-affected companies including an eight-year tax holiday for imported machinery.

Payungsak Chartsutthipol, chairman of the Federation of Thai Industries (FTI), said the private sector has proposed delaying the daily minimum wage increase until the end of next year or early 2013 to assist flood-hit businesses.

The central wage committee recently decreed the daily minimum wage would rise by 40% from next April 1 instead of Jan 1 as originally planned.

“We would like to postpone it another seven or eight months so that affected areas can speed up their recovery,” said Mr Payungsak.

However, Sommat Khunset, the FTI secretary-general, said even a year’s delay in the increase may be too short, as it is not known how people will cope with the flooding aftermath.

“I believe the government will not exacerbate the damage to their own people and economy and that each sector will cooperate,” he said.

James Phillips, the managing director of the footwear manufacturer Ecco (Thailand), said the Thai unit would ask the parent company’s owner, who is flying in from Denmark today, to set up temporary production facilities in non-flooded areas near Bangkok.

The Thai unit’s plant, with a staff of 3,500, in Ayutthaya’s Saharattananakorn Industrial Estate, has halted production since Oct 4, while a smaller plant in Phichit province with 1,500 workers is ramping up production to normal levels after a brief disruption stemming from a supply shortage.

The proposed temporary site, accounting for 30% of Ecco’s normal production, would start up this year.

Ecco’s Thai unit last year generated revenue of 150-200 million (6.31 billion to 8.4 billion baht) or 30% of the company’s global sales.

The BoI also met yesterday with representatives of Asian Honda Motor.

The Japanese carmaker asked that passenger cars and auto parts imported from outside Asean receive tax benefits under the Asean Free Trade Area.

Honda today will resume production at its Lat Krabang motorcycle plant, with annual capacity of 1.8 million units.

“I hope we can recover the Rojana plant within a month of the water receding,” said Hiroshi Kobayashi, Honda’s president and chief executive.

“We will never move the factory from Thailand. Our success in Asia has stemmed from our operations here.”

It is confident it can maintain its 6,000 employees at the Rojana factory, which produces 240,000 units a year.

Source: Bangkok Post

ThaiVest Editorial Team

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