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Cablegate: Auto Industry in Thailand Cuts Production

VZCZCXRO0094
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #3490 3311018
ZNR UUUUU ZZH
R 261018Z NOV 08
FM AMEMBASSY BANGKOK
TO RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/SECSTATE WASHDC 5209
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHCHI/AMCONSUL CHIANG MAI 5904
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHDC

UNCLAS BANGKOK 003490

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PGOV TH
SUBJECT: AUTO INDUSTRY IN THAILAND CUTS PRODUCTION

REF: A) BANGKOK 3229 B) BANGKOK 3144 C) BANGKOK 2885
D) BANGKOK 3336

1. (SBU) Summary. American automakers in Thailand have
reacted to a decline in domestic and regional demand by
revising growth forecasts downward and reducing production.
Ford has cut back production of cars for the remainder of the
year. General Motors has taken more drastic steps, including
ceasing production for two months and reducing the salary of
2,000 workers. U.S. auto executives in Thailand feel
confident they will weather the storm and resume production
next year as usual. (Note: Thailand-based U.S. manufacturers
do not export to the U.S.) Japanese automakers have
experienced similar difficulties and have also decreased
production of automobiles. End Summary.

2. (SBU) Thailand's economy has not escaped the global
financial crisis, with the Thai stock exchange being
particularly volatile (ref A and C). Thailand's government
has adopted various measures to stimulate the economy and
promote growth (ref B), including its promotion of a
multilateral currency emergency fund (see ref D). As a
result of the general economic downturn, Ford Asia-Pacific
and Africa (Ford) and General Motors Southeast Asia
Operations Limited (GM) are experiencing difficulties similar
to other industries in Thailand, including the tourism,
retail, and banking sectors.

3. (SBU) GM and Ford together account for less than ten
percent of the automarket share in Thailand, according to
executives at the companies. Both Ford and GM produce cars
in Thailand mainly for export, although none of the cars are
intended for the American market. Econoff spoke to Liam
Benham, Vice President in the Governmental Affairs Department
at Ford, on November 21. Benham explained 80 percent of Ford
cars in Thailand are exported to over 120 countries, none in
North America. Econoff also spoke with Kanchit Chaisupho,
the Director in the ASEAN Public Policy division at GM, on
November 21. Chaisupho stated that about 60 percent of GM
cars made in Thailand are exported, primarily to the Middle
East and neighboring ASEAN countries. The remaining 40
percent is intended for the Thai market. Demand from these
markets has decreased by as much as twenty percent according
to the executives. GM and Ford have had to respond to
decreased demand by taking temporary measures to reduce
costs.

4. (SBU) Ford has responded by reducing production of
vehicles this month. Bentham noted that the company had
already met production targets for 2008 and was producing
above capacity for much of the year. Ford is not planning to
reduce workforce or salaries at this time, but may adjust the
workforce by shifting personnel to different departments.
Benham emphasized that Ford is committed to Thailand and
pointed out that Ford is proceeding with plans to produce the
Ford Fiesta, a so-called B-segment or subcompact car, early
next year. Benham admits that Ford's production in Thailand
and profits could be down by 10 to 20 percent next year.

5. (SBU) General Motors Southeast Asia Operations Limited
(GM) will shut down plants for about two months beginning in
December 2008 with plans to reopen in February 2009 according
to Chaisupho. In addition, about 2,000 workers will receive
only 75 percent of their pay during the two month cessation.
GM announced that employees could voluntarily retire, but
fewer than 200 workers have chosen this option. White collar
staff and salespeople will continue working as usual.
Contrary to press reports and some statements by union
leaders, the executive stated GM has no plans to permanently
lay off workers. Chaisupho also stated they are lowering
production targets by about 20 percent for 2009 and expect
profits to be down by a similar amount.

6. (SBU) American auto firms are not the only ones
suffering in Thailand. Toyota, Isuzu, and Honda, which
together account for over 80 percent of market share in
Thailand according to Toyota sales figures, have been
affected by the economic crisis in similar proportion to GM
and Ford. The Japanese automakers also focus heavily on
exports to ASEAN countries and specialize in one-ton pickups.
Prominent media reports and public statements by the
Federation of Thai Industries indicate that many Japanese car
makers have stopped paying overtime, temporarily laid off
workers, and reduced auto production.
JOHN

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