Filed under: Plants/Manufacturing, Toyota, Earnings/Financials
Toyota worried about labor costs in U.S.
Here's something you might have seen coming. We've talked about how labor costs have been one of the major factors cited as keeping the domestic automakers behind the 8-ball regarding profitability compared to Japanese competitors. Sure, there's more to it than that, but the fact remains that labor costs are high on the list. How does that effect foreign automakers that have domestic workforces? About how you'd expect. Toyota, for one, is warning that U.S. labor costs could severely curtail their profits in the not-too-distant future. Continues after the jump
[Source: Freep]
The Detroit Free Press got its hands on a report by Seiichi (Sean) Sudo, president of Toyota Engineering & Manufacturing in North America, which tells senior management about the labor situation. In it, he outlines a recommended plan to keep wages more in line with local manufacturing than with just auto manufacturing compensation nationally. This should create an interesting situation in the next few years as Toyota tries to keep costs down. The stated goal is to reduce the projected $900 million in labor costs by one-third by 2011.
Intriguing, especially when one considers UAW moves to guarantee wages and employment in the industry. Some of Toyota's non-union workers actually out-earned domestic union workers last year, according to the Freep. It's a fascinating read, as it gets deeper into the psyche of Toyota, which despite record profits, keeps its eyes on the future and possible crises ahead. It also discusses the ramifications of Toyota's moves on negotiations between the UAW and domestic automakers. Click the read link for the story in its entirety.
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Reader Comments (Page 1 of 2)
Whydrive 5:37PM (2/09/2007)
There's still a few more years left in those tax breaks the local and state governments lavished them with. Once those expire, then those folks will be in the same position as all the SoCal Nissan workers (move to TN or find a new job).
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LMdealer 5:44PM (2/09/2007)
Well doesn't that suck!
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NoNameDenton 5:45PM (2/09/2007)
Gee, my heart is broken, Toyota will have all the issues that Ford and GM have with American workers, and have curtailed profits
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rrr 5:55PM (2/09/2007)
Well it seems to me that the future of auto business lies outside of USA. I really do not think that any industry can afford to pay $60,000 plus full healthcare to people who have High School degree or some college, and who live in South or Midwest, where cost of living in much more affordable. Just to point out, people with 4-year degree in Finance, or Computer Information Science probably will not be making 60,000 in their first 6-7 years out of college.
All this leads to one conclusion, that is automakers, all of them, not just two Detroit Deadbeats suffer some major financial crisis, they will move at least some of their plants to Asia or South America. Because for $60,000 you can probably have a PhD assemble your cars in S America, China or India.
Also as global trade increases, shipping costs will come down and it will be possible to ship to USA all sorts of car, not just big-ticket cars.
It seems to me that the only language UAW understands is the language of fists and blows.
However in my opinion the biggest threat to USA is not UAW, it is SEIU, by far the scariest union. Why are they so scary? They have many many many government employees and nurses, and these people with almost no education make as much as and in many cases more than UAW people, and they will do everything possible to hold on to their jobs, plus their jobs are not outsourceable.
I believe everyone should have healtcare, which is something all unions fight for, HOWEVER i do not believe that it is OK to elect politicians into office, and later have them give you yet another salary increase, ala SEIN and teachers unions.
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rrr 6:04PM (2/09/2007)
#3, you are way off. First of all Detroit gave up without a fight to unions, secondly if Toyota is unionized they can reduce number of plants in USA.
And my god how many times can i say this that only 5 years ago Ford and GM were making money....the union contract was the same, yet they were making money.
The issue is with PRODUCT, and with new Taurus/Mondeo/500/Jaguar making a comeback i am sure you can see why Ford would blame unions.
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Eric 6:06PM (2/09/2007)
Nummi(GM/ Toyota plant) has #1 highest paid employees in the world.
I personally work for Toyota at the WV plant, so yay me
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david 6:26PM (2/09/2007)
rrr, in your feeble attempt to sound like a hard core rush limbaugh conservative rebublican, you have done nothing more than made yourself look more of a fool than we always thought you were.
for starters, lets just give it all up and send All the auto manufacturing south of the border. roughly three quarters of a million jobs gone, now the small manufactures, the ones that make the parts, let them go as well roughly 2.3 million jobs. then there's the truckers that deliver the cars, can't do without them, so let's just knock their pay in half. now the towns and cities that depend on all of them for taxes to build the infrastructure, and the stores, resturants, shops, etc.that depend on those workers to spend money in their shops, well, they don't need the money. oh hell, let's just shut down the whole country and outsource everything. including what, if anything, you do for al living. afterall, alls we need is the RICH people in this or any country to keep the economy rolling.
i live in the midwest and know lots and lots of people that 60K per year is, (after housing, utilities, food, gas, a decent car, good schools, and maybe going out to dinner or a show once a month) a wage that lets you live week to week.
you're clueless.
the unions are'nt the threat to the usa, idiots like you are the threat. i'm retiring in two years and i can only pray that we baby boomers don't leave the country in the hands of boneheads like you!
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rrr 7:05PM (2/09/2007)
"hard core rush limbaugh conservative rebublican"
OK. I am not sure to laugh or to cry at that.
I know that US would suffer if automakers move, but what i am trying to say is that if unions will continue to do what they are doing these jobs will leave USA. I do not want that to happen.
As for 60 Gs, i live in NYC, it is a lot of money for us here. Have you ever been on Manhattan? it costs $12 for half an hour to park a car in a garage. And yet somehow people leave on less than 60 Gs in NYC.
Once again, most people who work on assembly line are high school educated or have some college, there's no way that in the open market people with these skills would be able to make so much money. Again, i want everyone to have health care, but as far as MONEY goes unions are overdoing it.
Do not shoot the messenger, all i am saying is that if Unions will continue on the current path soon these jobs will move out of USA.
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whofan 7:08PM (2/09/2007)
Keep buying them so called American Toyota`s. One day Toyota will pull out then what? GM and Ford will still be pulling in money for this country even if they have to do their manufacturing elsewhere to stay competitive.
Right now Toyota is rolling in money yet they`re rumbling about labor cost? They also want to share (gain)technology with (from) the domestic makes. Toyota wants to squash the American auto industry and ask us to help them do it.
Toyota is a douchbag of a company.
Sorry if I offend any of those here who work for Toyota. You are the people who make Toyota successful. I`m just saying watch your back!
Pray for the American automaker, they are the life blood of this country!
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Lithous 7:20PM (2/09/2007)
"people with 4-year degree in Finance, or Computer Information Science"
Computer Information Science degree. Is that what they call now-a-days? When I went to school they just called it Computer Science. Whatever sells. Anyway, I know dozens (maybe zillions) of (low to mid) 30 somethings (which starts to hit in your range of 6-7 years after college) that make way over $60K that develop software. Starting out of college I hear of many making over $50K range right now. But that won't last forever of course.
"All this leads to one conclusion, that is automakers, all of them, not just two Detroit Deadbeats suffer some major financial crisis, they will move at least some of their plants to Asia or South America."
Nice bashing of America(n car companies) with the "Deadbeats" thing. Anyway, who will be able to move most of their production out of the country quicker, those who have no unions or those that do? You mean Toyota won't be showing the love like they do now? Unless of course Toyota can beat the U.S. car companies down enough (like Watanabe tirades and other shit eating tactics) so they declare bankruptcy and move production out first. Toyota would love that then they wouldn't look like the bad guys.
"Because for $60,000 you can probably have a PhD assemble your cars in S America, China or India."
So what. Assembly takes a couple things a PhD may or may not have. First it takes some hand eye coordination to do a lot of assembly and because someone is smart doesn't *always* mean they can assemble things. But second, and more importantly, can a PhD that went to school forever to get their PhD handle the "get in at X o'clock" and "do monotonous work" and "only break during break times" thing? Maybe if they "got their degree on the way over" as my brother-in-law who has a biotech company and hires people from all over likes to say all the time. Not sure how much he is exaggerating that.
The funny thing is if you believe the myth about the Japanese companies you'd think they would be able to do Henry Ford did by halving the cost of the automobile and nearly doubling the workers wages. But, alas, the Japanese are human. They will just resort to labor cost reduction as opposed to sending out a memo that "we need to make the XYZ system 10 times more reliable and get rid of unnecessary parts so we can keep all the lovely Americans in which we adore working for the next century with 100% pay raises every year". That is the memo I would have expected from the hype I hear about Toyota. "They don't talk about profits at their stock holders meeting" and all this stuff commenters SPEW like they believe Toyota is god-like.
Just like they thought their emperor was god-like up until the 1940's many will see the truth sooner or later.
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uncle john 7:44PM (2/09/2007)
"#3, secondly if Toyota is unionized they can reduce number of plants in USA"
Sounds exactly the path Toymotor wants. You see, now they hold the unions at bay with union like wages and good, not great, good benefits. A Toymotor worker was quoted on the DFP website as saying that , while he is in favor of unionizing, the overwhelming majority of emplyees have the mindset of "Ive got it made now, why do I need to unionize". If this high ranking twit gets his way, their $25/hr wage will be $14/hr. Also, talk is that he suggests more "in house" (read; doctors hired by Toyota) health clinics and pharmacies. Would YOU trust YOUR OR YOUR FAMILIES health to some quack hired by your employer? "Oh no rrr, that cough has nothing to do with the fumes coming from those barrels at work. Trust me!!"
It is this type of attitude that is going to allow the unions to waltz right in. After all, would YOU accept a pay cut in half just to stay put? Or would you join a union and fight the fight (provided, of course their AREN'T comparable jobs to go to). I would assume in NYC competition for workers at similar job titles would be greater that it is in the South or Midwest, with there not being any other automakers in the area, as well as things being much more spread out. If they did unionize, because of the shenanigans we are reading about in this post, then that would give Toymotor their "out", and go running back to Japan like the little crybabies they are.
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Billy C. 7:59PM (2/09/2007)
"Pray for the American automaker, they are the life blood of this country!"
This used to be true, but not any more, and not in the future. Sad but true.
The US manufacturing industry is booming. We don't really need legacy auto manufacturers for defense or full employment or anything else.
The US automotive industry as a whole is doing fine - its really only the UAW manufacturers who are suffering. The rest of the industry will do fine as long as they are price competitive.
rrr is right. Too many people believe in the power of wishful thinking. Good luck with that. The US manufacturers need to do whatever it takes to be price and value competitive - and they will.
Ford's future may be as a primarily non-US company. Chrysler already is.
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j 8:07PM (2/09/2007)
Good, leave and don't come back, you suck!
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Lithous 8:10PM (2/09/2007)
"The US manufacturing industry is booming."
WTF? You are cracking jokes, right? I mean, Motorola used to make a ton of their phones (cell and cordless) and hand radios in the U.S. up until the late 90's and early 00's. Kodak doesn't "make" a single camera here. U.S. Robotics used to "make" devices here. On and on. If you mean U.S. design companies are doing great then OK, maybe. Ipod = made in China. IBM = PC unit not just sent but OWNED by chinese. U.S. military just gave Michelin their major tire contract and not Good Year. RCA, Zenith, etc. haven't been American a long time. Go try and buy a light fixture made here anymore. Last time I wanted one and could find one was around 2000 (maybe).
Please site some examples of actual U.S. manufacturing companies that are booming. You mean the ones that do niche things with mostly foreign parts? I would bet that if you opened up a B&K Components audio/video box it is full of foreign parts that are assembled in New York (btw, if that is the most American of all AV players, then that is the one I end up owning, used though, because it is so expensive new, but my point is that "booming" isn't quite the word I would use if some assembly or no assembly from a "manufacturer" is the case).
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david 8:16PM (2/09/2007)
History will always repeat itself. Manufacturing has followed the least expensive labor throughout history. The production economies sooner or later move to consumer economies and around that time standards of living decrease.
roar
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bernie 8:19PM (2/09/2007)
The reason unions guarantee failure isn't wages. All of the transplants are within a few bucks an hour of the little 3 and they're working more overtime anyway. The reason union shops are failing is their unwillingness to perform other tasks when needed and their inflexibility on the real demon making the US industry uncompetitive - healthcare.
The UAW insisted on running the Detroit industry into the ground buy forcing gold plated healthcare for workers and retirees when they knew it would kill the golden goose.
All manufacturing operations in the US will fail if something isn't done to limit the medical and pharmaceutical lobby's influence in DC over the next five years. Mark it down.
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Brian W 9:42PM (2/09/2007)
#15 hit the nail on the head. They can blame unions all they want but it's just an excuse to move to a cheaper country. When they start paying $14 an hour, they'll have a hard time finding workers that could make that much doing an easier job elsewhere. Auto plants these days are hard work and hard on your body, that's why they pay what they do. That's something these(I'm better than you)college people will never comprehend.
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Matt 9:58PM (2/09/2007)
You know what they say: can't pay a white man $2 an hour to do what an asian will do for $2 a week!
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BCM 11:13PM (2/09/2007)
As long as industries in more advanced countries are willing to transfer technology to less advanced countries in order to take advantage of cheap labor, which Adam Smith didn't really envision when developing the theory of comparative advantage, no worker anywhere is going to be able to have a better standard of living than the masses in China and Viet Nam. (Sure, their lifestyle will be improving, but we have farther to fall before we meet them on the way up.) Eventually every country will have a small core of plutocrats ruling a mass of serfs, just like the Middle Ages (or present-day Russia or Latin America). Then will come another age of revolutions, even in polite, authoritary-respectful Japan. The Republican fallacy is that this isn't happening. The Democratic fallacy is that it can be stopped.
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Her Majesty Nancy Pelosi 11:57PM (2/09/2007)
I suggest we tax automakers even more. That's will help jobs.
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