The worst US auto market since the early 1990s may force Toyota Motor Corp to do something that was once unthinkable: cut its North American payroll.
Asia’s largest automaker, which hasn’t shed workers in 24 years of building cars in the US, is exhausting options to trim costs after halting work on a Prius plant in Mississippi, idling a Texas truck factory for 15 weeks and planning to pare US and Canadian output next month.
“If we don’t see a rebound by the second half of next year, they’d probably have to consider layoffs,” said Haig Stoddard, an analyst at forecaster IHS Global Insight Inc in Troy, Michigan. “Toyota was expanding to catch up with demand. Now it’s got itself stuck with overcapacity for the first time.”
Adding to the pressure on North American operations amid a 13 per cent slump in US sales will be Toyota’s first operating loss in 71 years. Toyota on Monday projected a deficit of ¥150 billion ($1.7 billion) in the year ending March, erasing a forecast for a ¥600 billion profit.
Job cuts can’t be ruled out as sales continue to fall, said Jim Wiseman, vice president of external affairs for Toyota’s North American production unit.
“We wouldn’t anticipate it getting to that point, but we never say never,” Wiseman said. Toyota has 30,000 North American employees spread among 14 assembly, engine and parts plants, and vehicles built in the region made up 56 percent of US sales through November.
The Toyota City, Japan-based company hasn’t cut full-time workers since 1950 in Japan, when it last posted an annual loss, though temporary jobs have been eliminated. Toyota adopted a lifetime employment policy after years of labor turmoil, said Jim Womack, chairman and founder of Lean Enterprise Institute in Brookline, Massachusetts.
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“At the end of the day, you can be as paternalistic as you like, but if there’s no cash in the till, it all comes to an end,” said Womack, co-author of “The Machine That Changed the World,” a book about Toyota.
Toyota’s operating loss in North America for the six months ended in September was ¥34.6 billion, excluding gains on interest-rate swaps.
Regional production fell 13 per cent to 1.45 million units through December 20, according to trade publication Automotive News. Most of the drop came from idling the San Antonio plant and an assembly line in Princeton, Indiana, from August 8 until November 3 as inventory of Tundra pickups swelled.
Meanwhile, Toyota Motor Corp President Katsuaki Watanabe may step down next year and be succeeded by Akio Toyoda, grandson of the founder of Asia’s largest automaker, people familiar with the matter said.
Watanabe’s exit is intended in part to take responsibility for Toyota’s forecast this week for a ¥150 billion ($1.7 billion) operating loss for the year ending in March, said one of the people, who asked not to be identified because a decision hasn’t been announced.