Business World

Japan’s top two automakers, Toyota () and Honda (), will slash output further to counter swelling inventories as auto sales slump, while third-ranked Nissan () is seen shifting some output abroad to cut costs.

Subaru maker Fuji Heavy () became the latest auto firm to forecast losses this fiscal year as a spreading global recession dampens demand in mature markets and puts the brakes on sales in emerging markets.

The economic woes are also affecting motorcycle demand, and Yamaha Motor () said it would halt production at 11 plants for up to 10 days.

Toyota Motor’s announcement of output cuts at North American plants followed General Motors’ () warning that its U.S. auto sales this year would hit the lowest in 27 years.

Toyota, which expects a first ever annual operating loss this business year, said its inventory of North American-built vehicles was 80-90 days, having doubled in the past year. It hopes to cut that by half in the second quarter.

“The current inventory level is a record high for Toyota, though the market slump is unprecedented so rising inventories are unavoidable,” said Okasan Securities analyst Yasuaki Iwamoto.

“Sales are falling 30-40 percent every month, and this pace of fall is unheard of for either Toyota or the overall industry,” he said. “Automakers have to cope with it through production cuts as quickly as possible instant cash advance.”

Toyota has previously said it will halt production at its Japanese plants for 11 days in February and March.

The world’s biggest automaker had already reduced North American production of its best-selling cars, including the Camry and Corolla sedans, and suspended work on a new plant in Mississippi that was due to start producing the popular Prius hybrid from 2010.

HONDA, NISSAN SCALE BACK

Honda said it would reduce its domestic output by an additional 56,000 units, expecting its Japan production to total 1.168 million units this business year to March, against its original target of 1.31 million.

Nissan also announced further output cuts in Japan on Thursday and a source said it would book an annual operating loss.

Nissan was aiming to cut production costs by 30 percent by making its March subcompact in Thailand instead of Japan, the Nikkei newspaper reported on Friday.

Shares in Toyota and Honda jumped 6 percent and 8 percent respectively, helped by a weaker yen. Nissan added 3.8 percent, outperforming the Nikkei average’s .N225 2.6 percent rise.

TOUGH ENVIRONMENT 

Read more