Stocks Left High and Dry After Thai Floods Peak

Joel Anderson  |

Flooding in Thailand reached its high-water mark over the weekend, leaving inner Bangkok dry while soaking the city's suburbs. Thailand, a center for manufacturing, has seen major disruptions of their industrial base that will have ripple effects across the globe. Major automakers and technology companies expect significant disruption to their supply chain that may seriously affect earnings and global supply.

Honda Left High and Dry

Honda Motor Company, Ltd. (HMC) expects to be seriously affected by the flooding, building nearly 5 percent of its cars in Thailand. The stock gapped down today, dropping nearly 8 percent as the company reported a severe drop in their second quarter earnings. Honda reported that its net income from Q2 fell 55 percent year-over-year to $788 million. These results were largely consistent with analyst expectations, caused by both the aftereffects of the Japanese earthquake and Tsunami in March, and the appreciation of the yen. However, the Thai floods meant the bad news kept piling on and prompted the sell-off. Honda will reportedly have to close its Thai factory for approximately six months, Japan's Nikkei Business Daily reported, a move that will affect 3 percent of its annual global car output. The parts shortage will force Honda to halt production in its six North American plants from Nov. 2 to Nov. 10, and the company has withdrawn any 2011 guidance because of the natural disaster.

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Auto Industry Affected

Several other automakers have factories in Thailand and anticipate supply chain disruptions as a result. Toyota Motor Corp. (TM) cut overtime production in the United States until the end of the week as they scramble to find alternative parts suppliers. Toyota, which has seen its stock lose 15 percent in the last three months, gapped down another 3.5 percent in early trading today. Nissan Motor Company, Ltd. (NSANY) reported that their Thai productions would be shut down until Friday. American carmakers have also felt the pinch, with Ford Motor Co. (F), which assembles the Fiesta in Thailand, having to close it's factor for six days last week and General Motors Corp. (GM), which also uses Thailand as a production hub, seeing disruption to its supply chain as well.

Tech Companies Also Disrupted

A number of different tech companies use Thailand as a base for their manufacturing operations, and the flooding has seriously affected global supply of hard drives as a result. Western Digital Corporation (WDC), the world's largest hard drive maker, got dealt a bad beat when its factories got hit hard, likely affecting supply until June of next year, while competitor Seagate Technologies (STX) lucked out and saw its factories remain unaffected, prompting a run on the stock that left it up nearly 60 percent on the month. Samsung Electronics expects a serious hit in their production of dynamic random access memory, or DRAM, as well as hard drive manufacture. Apple, Inc. (AAPL) is facing serious shortages in components used in their Mac Book computers, and other electronics makers like Sony Corp. (SNE) and Toshiba Corporation (TOSBF) will also see their production affected into the foreseeable future.

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