Toyota shuts plants as crisis bites

The Toyota brand name is seen on a car at a dealership in Chicago, December 22, 2008. (REUTERS/Joshua Lott)

TOKYO (Reuters) - Toyota Motor Corp, reeling from its worst U.S. sales decline in more than a quarter of a century, will shut all its factories in Japan for 11 days as the global economic slump hits demand and company profits.

The news from the world's biggest auto maker shows how the global crisis, likened to the Great Depression of the 1930s in its scope and severity, has spread from the U.S. housing and banking sectors to threaten every part of the world economy. Governments and central banks have been working overtime to try to limit the fallout of the global crisis, flooding the financial system with cash, cutting interest rates and increasing spending.

South Korea said on Tuesday it aimed to create almost 142,000 jobs this year through infrastructure and environmental projects, part of a five-year, $38 billion plan to generate almost 1 million jobs.

Chile announced a $4 billion stimulus package based on public spending on infrastructure, subsidies and tax rebates.

"Facing this crisis will be the number one priority of my government this year," said Chile's president, Michelle Bachelet.

China, which relies on strong growth to create jobs for its millions of migrant workers and graduates, risks a wave a protests and riots in 2009 as rising unemployment stokes discontent, a state run magazine warned on Tuesday.

Researchers at the country's central bank forecast China's economy will probably grow by about 8 percent this year, in contrast to some analysts who predict a much sharper slowdown.

On Monday, U.S. President-elect Barack Obama met with Republicans and Democrats in Congress seeking support for a stimulus package of up to $775 billion over two years, including hefty tax cuts.

CAR SALES SKID

But despite the best efforts of policymakers so far, economic indicators have been almost uniformly dire, with a 36 percent decline in U.S. December auto sales the latest grim reading.

Led by sales drops of 53 percent at Chrysler LLC, 48 percent at Hyundai Motor and 37 percent at Toyota, the industry closed out its weakest year since 1992 in its largest single market.

Prospects for a quick recovery looked bleak.

"The first several months of 2009 are going to feel very much like the last few months of 2008," said Ford economist Emily Kolinski Morris. "We see little to indicate a near-term improvement in either financial market conditions or economic activity."

Toyota, which saw its worst U.S. monthly sales decline since at least 1980, said it would suspend operations at 12 vehicle and parts plants in Japan for six days next month and five in March in response to declining demand.

The cuts come on top of a three-day suspension at domestic plants this month and after the company warned two weeks ago that it would post its first-ever annual operating loss.

STOCKS FIRM

Stock markets, many of which suffered their worst year ever in 2008, have taken some heart from the raft of measures introduced in recent months.

Japan's Nikkei average hit a two-month high and stocks elsewhere in the Asia-Pacific region rose for a seventh straight session on Tuesday.

"Growing expectations for the administration of Obama are making investors that much more willing to take risks, and I think we're also seeing more buying by foreign investors," said Hideyuki Ishiguro, supervisor at the investment advisory department of Okasan Securities in Tokyo.

MSCI's All-Country World index has jumped 25 percent since hitting a five-year low in late November.

Prices for oil and industrial metals such as copper were also higher after racking up big falls in 2008 on worries about slumping demand.

(Reporting by Reuters bureaux worldwide; Writing by Lincoln Feast; Editing by Neil Fullick)