05/22/2011 11:04 am ET Updated Dec 06, 2017

Toyota Says It's In 'Healthy Position,' Moving Toward Full Production

DETROIT (Deepa Seetharaman and Bernie Woodall) - Toyota Motor Corp told its U.S. dealers this week that the company had 45 days of inventory and was working hard to get the word out that it was "open for business."

In a letter obtained by Reuters, U.S. Toyota brand sales chief Bob Carter told dealers the company was in a "healthy position" as it moved toward a full production schedule.

The company recently announced that eight of its North American-built models, including the Camry and Corolla, would return to 100 percent production in June.

"This is well ahead of our previously announced timeline of November/December," Carter said in the letter.

The earthquake that rocked northeastern Japan on March 11 forced Toyota and other Japanese automakers to cut output at home and abroad as they struggled to secure vital auto parts. The subsequent nuclear disaster and power shortages further complicated problems.

But Toyota has moved to restore production more quickly than many analysts expected. In the letter, Carter reiterated that the automaker's U.S. production would be 70 percent of normal volume in June, up from 30 percent in May.

Toyota forecast a full return to production for all models and factory lines by November or December.

At 45 days, Toyota's current inventory levels is just five days less than its May 2010 inventory level of 50 days.

But Toyota's sales rate has dropped even more quickly than its inventory level, Chief Executive Jeremy Anwyl said. He said data shows that Toyota's supply of vehicles is outpacing current demand.

Analysts said Toyota's sales have been pinched because curbed auto production has pushed car prices higher at a time of rising fuel prices. The perception of low inventories has also dampened demand.

"The thing that's happened for Toyota is that all the media coverage of shortages and higher prices has pushed demand down faster than reduction in supply," Anwyl said.

Carter addressed this notion in his letter to dealers, "Our team has been working aggressively to spread the word that Toyota is 'open for business.'"

U.S. auto dealer groups as well as industry analysts have said June is expected to be the thinnest month for Toyota inventories, and that lack of inventory in May and June will reduce sales.

On Thursday, J.D. Power and Associates said May sales will be "dismal," down 10 percent from April, in part because of the lack of inventory due to the March 11 earthquake in Japan.

On Thursday, Honda Motor Co's U.S. sales chief, John Mendel, sent a letter to Honda dealers, also assuring them that while June will see short supply of vehicles made in Japan and for the popular compact sedan Civic, July allotments will rise 11 percent from June.

"We have all the confidence in our ability to increase our production in late summer," Mendel said in his letter to U.S. Honda dealers.

(Reporting by Bernie Woodall and Deepa Seetharaman; Editing by Steve Orlofsky and Richard Chang)

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