Handling a Downturn the Toyota Way

BusinessWeek has an online article about how Toyota is handling the downturn in the economy by, among other things, rejiggering production at US plants and keeping 4500 people employed, as well as adding more hybrids to their line.

[IMGLINK]http://images.businessweek.com/ss/08/10/1020_toyota/image/1_prius.jpg[/IMGLINK]

I'm very happy to own a great car made by a great company.

"Toyota plans to introduce more hybrids and more attractive smaller cars."

Nice!

Toyota had a television commercial on last night that said "In this economy, cash is king. And, Toyota has plenty of cash to lend you. That is why we are offering 0% financing..."

In an economic downturn, those who have large credit debts and are losing money cannot afford to invest much (if any) in R&D. Those who have ample cash reserves and are not losing money can continue to spend on their full R&D budget. In all industries, every time through history that there has been an economic downturn, this is a time that REALLY separates and advances the companies that are strong and pummels those that are weak.

Maybe Japan will step up and give us the money for unemployment benefits and the government spending to come instead of loaning us back the money that was once ours. Just a thought.

Maybe if GM et al had faith in US workers, they wouldn't have transferred so much production overseas in the first place, leaving it to the likes of Toyota to have faith in the American worker. It isn't a handout that is needed, it is a swift kick up the butt of the big 3 for squandering a valuable resource - people. Just a thought too.

There was a segment on CNN a few days ago, saying that as Detroit has been laying off workers over the years, foreign auto makers have been hiring millions of American workers to work in factories in Alabama and surrounding states. In addition to the major Japanese auto companies, Hyudai, BMW, Mercedes, and others have multiple factories each in Alabama, employing millions of Americans. So, perhaps we're just seeing a shift; workers moving from the Big Three over to working for the foreign auto makers. In either case, millions of Americans are still being employed.

Yes and No. Alabama has 3 assembly plants. Mercedes has one plant in Vance, Honda has one plant in Lincoln, and Hyundai has one plant in Montgomery. They each employ 3,000 to 4,000 employees. According to information on the states website, 48,457 people are employed in automotive manufacturing in Alabama.

Transplant manufacturers use far fewer workers in their plants than the big 3. This is mostly due to difference in labor relations. The big 3 have thousands of extra workers that they can't get rid of due to UAW contracts. As such they've had little incentive to invest in automation as then they would just be sending UAW workers to the jobs bank and paying them to do nothing. The transplants started with a clean slate and no unions. They are heavily invested in automation and require few employees. They also tend to pay this smaller group of employees the same wage as their UAW counterparts to keep the union out.

I suspect the transplants are dreading the collapse of the big 3. If big 3 lower wages in bankruptcy court they are in a pickle. If the transplants don't drop their wages to match they face being uncompetitive. If they do drop wages they open themselves to unionization as the UAW comes to talk to thousand of pissed off workers and say " I told you so".

Back in 1967 my parents bought a 1967 Toyota Corolla. Excellent quality at a competitive price. The GM message about such a small car was that Americans would never want them. Some companies are just a little slow on the uptake...

Now if only they can rejigger their TV commercials.. That "Saved by Zero" commercial is annoying even faithful Toyota owners like me.

"Foreign automakers have been hiring millions of american workers in factories in the south"? You are obviously very knowledgeable on the subject.
First of all each transplant job is net loss of 3 american jobs, because as a rule many of the parts are imported, the design and engineering is done in Japan, Korea or Germany and the profit rolls back to the mother country. So we are seeing a shift, it is the wealth of the United States being transferred to foreign countries.
For the record Toyota does not employ 40,000 people in Canada, Mexico, and the US. I think you were off by just a smidge in your "millions" comment.

Good article Bill, thank you

Dbcassidy

According to autoobserver.com.....The Detroit Three employed 239,341 hourly and salary workers in the U.S. at the end of 2007. Foreign producers employed about 113,000 people in the U.S. at the end of 2007.

As far as the foreign companies importing parts, my Chrysler van is loaded with foreign parts.
Anyone is able to purchase stock of Toyota, Nissan, Honda and others and you are part owner of those companies and will share in their profits or....lose money if their stock prices fall.

malorn....You are just going to have to deal with reality. Management of the "Big Three" all but killed their corporations with their greed.
Take a deep breath and get on with your life.

Now I understand the American corporate way, make crap, use guilt and flag waving to sell it.
Malorn, you are directing your efforts here the wrong way, talk to GM about making a product people want, that is the only thing that might turn sales around for you.
Ask your local Toyota dealer how long his stock sits on the showroom floor. It isn't selling because of flag waving, it sells because it is good and it is what the people want.

I've been saying this a lot lately. In uncertain economic times, the weak go away, and the strong gain market share. If you are a strong company, now is the time to be cautiously aggressive.

It's not just the auto industry. The paper and printing industries have shifted to China. The computer industry shifted to Mexico & Eastern Europe then to Asia. It's a little late to slap that "Buy American" bumper sticker on your car & expect it to happen. At one point or another Americans stopped "buying American" based on price or quality. IMO we got what we asked for.

Don't forget that Japan bought hard assets (real estate) in the 80's and had to sell them back in the 90's at 50% or less than purchase price. That helped us. Japan then went on to go thru a severe recession for about 20 years. So Japan has already helped us in ways that, were at the time inscrutable and unforseen. At the time many Americans feared that Japan would own America. Rediculous of course.

Absolutely. Because of course the Japanese stole that money from us by making the cars we didn't want to buy, and then forcing us to buy them.

I wonder if OPEC will step up the same way? I wonder... did more money leave our domestic economy to buy "foreign" cars or to buy foreign oil?

The answer is oil, by a fairly large margin.

Data from this site appears to check with the Dep't of Commerce statistics. They say, for calendar year 2007:

Vehicles and parts, imports less exports, $131B
Oil, imports less exports, $293B

US Trade Deficit 2007 - A Description of the US Trade Deficit and Its Impact on the US Economy


For 2008, the runup in oil prices probably pushed the oil number up quite a bit higher.

I think Toyota really does want to move forward as a company. The big3 seem to be stuck in the past. Take the Chevy HHR for example. A prod. specialist at the show told me the HHR was styled after a 1949 Chevy Suburban. Then there's the PT Cruiser, styled to reminisce about the Rock 'n Rolls days of the 50's, 60's.

GM, Ford and Chrysler have obviously put a ton of engineering effort to rehash the Camaro, Mustang, and Challenger, all gas guzzling behemoths.

I knew what I wanted in a car and of course glanced through all manufacturers in magazines like Consumer Reports. But with the big3 having nothing close to what I was looking for, they never stood a chance.

Did you take into account Toyota's last two introductions were the Tundra and the Sequioa? When you say moving forward as a company what do you mean exactly?

No they, japan and china, "stole" the money from us by targeting industries, putting us to sleep when it comes to trade and taking almost $4 trillion dollars from us over the last 25 years. These are systemic deficits, we are not allowed to trade inthose countries, but they are allowed to do whatever they want in this country. We were just too fat, dumb and happy to realize what was going on. Now it is time to pay the piper. I wonder who on here will finally get the macroeconomic situation when unemployment is at 15% and there is rioting in the streets. As a nation we have been had economically.
The Automotive trade deficit the US runs with Japan is more than a $billion/week, double what the war in iraq is costing for some context.