Japanese auto giant Toyota said Wednesday its domestic output would return to about 90 percent of pre-quake levels in June thanks to a faster-than-expected recovery of parts supplies.

The forecast, more positive than a previous estimate of 70 percent production levels, will be a huge improvement on April when output was just 21.6 percent of that in the same month last year.

Production recovered to around 70 percent in May as suppliers -- many of whom were impacted by the March 11 quake and tsunami catastrophe -- were able to restore operations faster than expected.

There are no precise figures for production abroad, but expectations for June are between 70 and 100 percent, Toyota spokesman Paul Nolasco said.

Production will still be 70 percent in North America while almost all factories in Europe will operate at 100 percent, he said.

The March 11 disaster hammered production, shattered supply chains and crippled electricity-generating facilities, including the Fukushima nuclear power plant at the centre of an ongoing atomic emergency.

Amid the power and parts shortages, Toyota had slowed output or closed factories temporarily in Japan and abroad.

Despite Wednesday's more upbeat announcement, Toyota shares fell 0.58 percent to 3,380 yen, as investors had already priced in the faster-than-expected production recovery.

After the markets closed, the company said it was recalling 139,000 vehicles globally, including 106,000 first-generation Prius hybrid vehicles because of a problem with the steering system.

The recall covers nearly 48,000 units of the Prius in Japan and a total of 58,000 units abroad, including 52,000 in the United States.

The company also announced a recall of more than 21,000 iQ compact cars in Japan to fix the braking system. A total of 12,000 iQs will be recalled in other countries including Britain.

The recall was a blot on an otherwise upbeat period for Toyota, with news reports saying Toyota's global output in the fiscal year to March 2012 would match last year's.

Recent Japanese auto industry data has highlighted the massive impact of the quake, but also pointed to a better-than-expected recovery.

On Tuesday the Japan Automobile Manufacturers Association (JAMA) said production and exports suffered record drops of more than 60 percent each in April as a result of the twin disaster.

The trade and industry ministry, citing production plans by manufacturers, said Tuesday that output of transport equipment including cars was to rise 35.7 percent month-on-month in May and by a further 36.7 percent in June.

New data from the Japan Automobile Dealers Association (JADA) showed Wednesday domestic sales of new cars, trucks and buses in May fell 37.8 percent from a year earlier, an improvement from a record drop of 51 percent in April.

The latest drop was milder as auto production had improved, an association spokesman said.

The disaster is set to increase demand for new cars in the longer run.

"Lots of cars were washed away in the tsunami in the Tohoku (northeastern) region, and it's certain that there will be surging reconstruction demand," said Tatsuya Mizuno, who heads the Mizuno Credit Agency.

"Production may not be able to catch up with the demand, resulting in missed sales opportunities for automakers.

"It will take some time (for automakers) to achieve full production," he said, adding that it would probably take half a year or more for vehicle manufacturing to return to normal.

Electronics firm Renesas Electronics, which has a 40 percent global share of microcomputers used in autos, resumed partial operation Wednesday at its quake-damaged chip factory in Ibaraki prefecture, northeast of Tokyo.

But it will not be able to begin shipments until late August as microchips need to go through several manufacturing and test processes.

Looking at the wider economy, Bank of Japan governor Masaaki Shirakawa said industrial supply disruptions were easing more quickly than expected, which would help the economy return to moderate growth in October-March.

Shirakawa told a conference in Tokyo that he still believed the economy would stay under "strong downward pressure" for the time being.

But he said "the economy is expected to return to the moderate recovery path from the second half" of the fiscal year, Dow Jones Newswires reported.

earlier related report
Toyota falls to #4 spot in US amid shortages
Chicago (AFP) June 1, 2011 - Toyota and Honda's US sales plunged in May hit by shortages from Japan's devastating earthquake, while rival Chrysler posted a 10 percent gain Wednesday thanks to hot new offerings.

Toyota fell to the fourth spot in US sales hit by parts shortages after the March 11 quake/tsunami disaster and a broader economic slowdown that also impacted US automakers, with GM and Ford reporting slight drops amid weak fleet sales.

But Toyota's plunge hits as the company tries to recover from a series of mass recalls which saw it lose the number two US spot to Ford in 2010 after a three year reign.

"As expected, May was an especially challenging month due mainly to uncertainties about our production forecast," said Bob Carter, general manager of Toyota Motor Sales USA.

Toyota sales plummeted 33.4 percent to 108,387 vehicles in May and were down 0.6 percent for the year at 701,851.

With production ramping up sooner than expected in both Japan and North America, Carter said "we're optimistic that our sales outlook will continue to improve."

Honda's sales dropped 22.5 percent to 90,773 vehicles in May and were up 7.4 percent at 523,550 for the year.

"May sales are on par with what we expected due to the lingering effects of parts and production shortages" after the quake, said John Mendel, executive vice president of sales for American Honda.

"We are confident that sales will rebound as our North American plants reach 100 percent production capacity for most models in August."

Nissan sales fell 9.1 percent in May, but were up 15.2 percent for the first five months.

US producers also felt the pinch of slower economic growth.

Market leader General Motors said May sales fell 1.2 percent to 221,192 vehicles from the year-earlier month, largely to a sharp drop in government, commercial and car rental fleet sales, which fell 16 percent.

That compared to an 18.2 percent growth pace in the first five months.

"Clearly there was a bit of consumer hesitation beginning of the month but I don't think we'll continue to see that," US sales vice president Don Johnson said in a conference call.

"The trend line continues to be up," Johnson said.

Ford sales were down 0.1 percent, also taking a hit on fleet sales, which fell eight percent.

Ford analyst George Pipas noted that the number two US automaker could have sold more vehicles if it hadn't also been affected by supply problems.

"Even when gas prices are advancing, we are able to compete in this market really effectively in a way that we've never been able to do it before, and keep the sales momentum going," he said.

Chrysler -- which last week paid off billions in government loans used to restructure under bankruptcy protection -- attributed its gains to a hot lineup of new and refreshed models.

Group sales, including the newly introduced Fiat 500, rose 10 percent to 115,363 vehicles in May and were up 20 percent for the year so far.

Fred Diaz, Chrysler's top sales executive, said the gains confirmed that "our 2011 models continue to resonate with consumers."

"Our retail sales were up 27 percent in May, driven in large part by our new models. Ram pickup trucks and all of our Jeep brand models posted sales increases in May, despite high, fluctuating gas prices."

While the US auto industry recovery is expected to continue, sales are not likely to return to pre-recession levels before 2016, according to automotive website Edmunds.com.

"We expect this momentum to continue, but at a moderate pace, given the fundamental steps that are still needed for a full economic recovery, said Lacey Plache, chief economist at Edmunds.com.

US auto sales have averaged 11.7 million vehicles annually in the past three years, down sharply from the 15 to 17 million sold every year from 1994 through 2007.

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