Toyota Looks Into Layoffs

By: Christine Tierney
The Detroit News

January 24, 2009

One of Toyota Motor Corp.'s most remarkable achievements is that it has not laid off any of its permanent workers in more than half a century.

But the Japanese automaker may be about to relinquish that proud tradition. Japan's biggest business newspaper, the Nikkei, reported Friday that Toyota was considering cutting 1,000 jobs in Britain and the United States.

Other Japanese papers have suggested even bigger job cuts may be announced as Toyota moves to reduce its output and costs in response to plunging demand for vehicles worldwide.

Toyota already has slashed thousands of temporary workers at plants and offices in Japan, the United States and other regions.

Toyota employs temporary workers, who can account for as much as 15 percent of the total work force in times of high production, and sheds them during slower periods. Toyota and Honda Motor Co. have avoided laying off people in their permanent work forces, even during cyclical dips.

"That would be a very last resort," Jim Lentz, president of Toyota Motor Sales Inc., told reporters at the Detroit auto show this month.

Toyota has just over 36,000 employees, half of them manufacturing workers, in the United States, out of a total of 316,000.

On Friday, Toyota's Motor Engineering & Manufacturing North America subsidiary said in a statement that "current business decisions are not forcing us to make involuntary reductions of Toyota team members" at plants.

But it said the company was considering "additional steps for managing our business," though it had not reached final decisions.

Toyota has never explicitly ruled out layoffs, Lentz said. "We don't have a specific policy of not doing that. We just have a tradition of not doing that," he said.

According to Japanese reports, Toyota also is envisaging a large-scale shuffle in its top management to coincide with the appointment of a new president, Akio Toyoda, the grandson of the company's founder. Toyoda is expected to be confirmed at the annual shareholders' meeting in June.

Such upheavals are unusual at Toyota, a company that has expanded steadily but cautiously for most of its 71-year history as an automaker. It has not fired permanent staffers since its brush with bankruptcy in 1950.

After expanding aggressively in recent years, Toyota has been buffeted by a global downturn that has left it saddled with excess production capacity. Like all Japanese exporters, Toyota also has been hit by a surge in the yen against other currencies.

In December, Toyota said it expected to report a $1.7 billion operating loss for the year ending March 31, the first full-year operating loss in more than 50 years. The loss partly reflects a huge cut in production during the second half of the Japanese fiscal year to bring down inventories.

Kurt Sanger, a Tokyo-based analyst at investment firm Deutsche Bank, estimates Toyota is now cutting its output by 25 percent. "That's going to be a real shock to this year's earnings."

But he said the company remains financially very strong. "Toyota's balance sheet is gold standard," Sanger said, with no automotive debt and $56 billion in cash and marketable securities.