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January 13, 2009
DETROIT - Toyota's culture of lifetime employment may be cracking under the weight of the recession.
Asked about the possibility of layoffs this year at the Japanese automaker, James Lentz, president of Toyota Motor Sales U.S.A., did not rule it out.
"We don't have a specific policy against layoffs. We have had a practice not to do that," he said as Toyota introduced the new Prius at the North American International Auto Show. "I can assure we can look and do everything we can so that would be a very last resort."
Toyota announced last month that it expects 2008 was its first money-losing year in 70 years and laid off part of its temporary work force, including most of the 500 at its Georgetown, Ky., plant.
Those workers have given Toyota flexibility to meet demand by supplementing a work force of about 7,000 permanent employees. In another sign of tough times at Toyota, the company in recent weeks indefinitely delayed production at a new plant to build the Prius in Tupelo, Miss.
Refusal to flatly reject a question about layoffs "is huge," said Jeannine Fallon, executive director of communications at Edmunds, an auto industry publisher based in Santa Monica, Calif. "I think the fact that they won't rule out layoffs sends a huge message."
Unlike in the United States, layoffs are anathema to Japanese corporate culture, she added.
But U.S. auto sales fell to a rate of about 10 million annually in the latter half of last year, a 30 percent to 35 percent drop from average sales in previous years. Like other manufacturers and analysts, Toyota expects those grim conditions "at least through the first quarter," Lentz said.
Toyota will finish the Tupelo plant that was to employ 2,000 workers assembling the Prius by the end of next year, he said. But the company has said it would delay installing equipment.
Lentz predicted U.S. auto sales next year will rise as high as 13.4 million vehicles annually. That is a more optimistic projection than those by J.D. Power & Associates and others, which forecast sales of roughly 12 million vehicles.
"In this economy, companies are forced to make difficult decisions," Fallon said.
Other analysts agreed.
By March, it is not unrealistic to forecast that Toyota will lay off permanent employees, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich. "Toyota is losing money and beginning to slip," he said in a presentation Saturday. McAlinden expects a fourth-quarter loss of $2 billion to $2.5 billion.
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