FEATURE - Toyota shock hits Japan's auto region

By Yoko Nishikawa

NAGOYA, Japan (Reuters) - Toyota shock has hit Japan's car manufacturing district, leaving factories and small businesses reeling as orders dry up due to a global recession that has put the brakes on car sales worldwide.

Toyota is firing thousands of contract workers, causing a rise in the number of jobless and homeless. The greater Nagoya economy is being hit hard with business slowing at shopping malls and taxi drivers complaining that customers are scarce.

"When Toyota sneezes, everyone catches a cold," said Toshiharu Nakano, who runs a Japanese kimono fabrics shop in Osu shopping arcade in Nagoya. "You see people walking around in this arcade but their purse strings are tight," he added.

Hit by the financial crisis and a crippling rise in the yen, Toyota Motor Corp has forecast its first-ever annual operating loss in its 70-year history and has unveiled an 11-day output suspension that is almost unprecedented in scale.

That's a sharp turnaround from as recently as 2007 when Toyota was riding high after eight years of earnings growth that made it the world's biggest carmaker ahead of General Motors Corp.

With Toyota's sales in the United States, its biggest market, declining by 37 percent in December, the pain is being felt all along the supply chain in Nagoya and across the Aichi prefecture, which thanks to car manufacturing is one of the most affluent regions in Japan.

At Takeshiro Kogyo Co., a 20-person factory that produces parts for Toyota car air conditioners and headlights, the fax machine used to spit out piles of orders. These days, faxes are rare.

"Nowadays, we only get faxes that show a decline in orders," said Sumiko Takeuchi, the company president. She points to virtually empty shelves that were once fully stocked with air conditioner parts.