By on June 19, 2010

A strike at two Toyota-affiliated parts makers brought Toyota’s largest assembly plant in China to a halt. No parts, no cars. Toyota’s factory in the port city of Tianjin near Beijing stopped production on Friday. A day later, it is unclear if production would resume on Monday, Reuters says.

The strike at a small plastic maker stops production at Toyota’s most important plant in China. Tianjin FAW Toyota Motor Co. is a joint venture between Toyota and China’s FAW Group. More than half of the cars Toyota manufactures in China come from this plant. Among the cars assembled here is the Corolla and Crown cars. The factory has an annual production capacity of 420,000 vehicles and manufactured about 380,000 units in 2009.

The parts shortage was caused by strikes at a Toyoda Gosei plastic parts factory  in Tianjin (42 percent owned by Toyota). This strike was preceded by a work stoppage at another Toyoda Gosei auto parts factory, Tianjin Star Light Rubber & Plastic.

Negotiations at Tianjin Toyoda Gosei are ongoing. The Nikkei [sub]  reports that police blocked a road leading to the main entrance of  the plastic factory. Management and workers seem to be holding negotiations.

More and more media outlets switch their reporting from the old cliches (oppressive government brutally crushes strikes by exploited workers) to a more sophisticated view. From France’s AFP to the New York Times, more and more reports believe that the strikes have the sympathy, if not the guiding hand of the Chinese government.

China’s workers have perfected the art of hitting small, but strategically important nodes of the supply chain. Says the Nikkei: “Any prolonged disruption at the parts plant in Tianjin could affect Toyota’s business throughout China.”

While the media is full with speculations that China might be losing its cost advantage, China’s Commerce Minister Chen Deming is unimpressed. “A small proportion of the contracts may be transferred to countries with lower costs, but China has yet to lose its labor cost advantage,” Chen told China Daily.

He has good advice for Chinese companies that relied too much on cheap contract manufacture: To address rising costs and keep their advantage in the international market, companies should climb the value ladder in design and marketing.

Update: The Nikkei [sub] says that the strike has been settled, and that Toyota’s main assembly plant can resume work on Monday. Workers agreed to accept a 20 percent wage increase, along with increased allowances for summer heat and for perfect attendance.

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5 Comments on “Chinese Strikes: Toyota Shuts Down Largest Plant In China – Will Reopen Monday...”

  • avatar

    Reading China Daily for a dose of official thinking, it looks as though many companies are going to relocate operations to the “low cost” Western provinces. Foxconn is the poster boy in this regard. They’re moving to keep the cost of assembling iPhones and HP servers down.

    The general idea is that by doing so, underdeveloped parts of China will get some industrial jobs, and even out the disparity between areas of the country. In addition, there is a ready supply of labor in these areas.

    So apparently, working people very (overly?) hard is still okay, if it’s in a part of the country deemed to need the jobs.

    The NY Times article you link to basically informs us that if not for cell phones, we wouldn’t have heard much from the strikers at Honda and Honda Lock, as the party shut down chat rooms on the web.

    I really don’t think the leopard has changed its spots. The difficulty they have to bring the overall standards of living up all across the country is apparent. This is one way to do it: allow strikes for foreign-owned companies and hold out the carrot to the transplants for cheaper labor costs elsewhere in the country. Difficult to move a car factory, but it can be done.

    Meanwhile, back here in the political West, we face a grim future. How do we generate jobs for Joe Six Pack that even at minimum wage are still five times China’s wages? That is not my question. A China Daily writer based in Washington poses it. She thinks we in the West are going to struggle. I agree. Especially with all the debt our governments have run up.

    It’ll be interesting to see how this all plays out. Half of Africa will become a Chinese economic zone since we have failed miserably there, but they’re hard at it these days. My prediction is that eventually, free trade will go the way of the dodo as we try to keep what we’ve got (left). Meanwhile, we are essentially paying for the modernization of China by buying their goods and abandoning our manufacturing base.

    Whether that’s good or bad depends on one’s point of view. My personal feeling is that there are just too many humans living on the planet for things to remain stable for too long. Not enough resources for everyone to live the “good” life.

  • avatar

    The stocks of Japanese robotics makers have been surging because of these strikes, the logic being that manual labor will be shifted to automation.

    And there is truth in that, these companies won’t be leaving China, as there is large Chinese domestic demand, however automation may be more heavily utilized in China then has been previously anticipated.

    The reality of course is that strikes are happening everywhere in China, only Taiwanese and Japanese strikes hit the news as the Chinese government only allows news of those strikes to become public.

    Foreign companies doing business in China will likely want to avoid a Foxconn like situation on employing hundreds of thousands of people where they are heavily exposed to labor risk and fluctuations.

    Instead of labor heavy industry, a sweeping modernization and automation of Chinese plants would allow for smaller workforce, but it would also mean that producing parts in China won’t be dramatically cheaper then other places. The worry of the “China Price” is lessened for suppliers.

    One thing for certain is that strikes will accompany the increased affluence of China, once this wave of strikes ends, we should continue see a consistent volume of labor strife over the next decade as Chinese cost/standard of living increases…

  • avatar

    I love automatization in China, as it will do wonders to quality. They still will be cheaper, because the overall overhead is lower.

    • 0 avatar

      Overhead may be cheaper, but in terms of export of Chinese made parts from the supply-side, logistical costs would outweigh any cost advantage. This is further exacerbated in the modern context of JIT mfg.

      Some Chinese-made parts may be supplied within Asian, but in large part China’s main advantage is low labor costs. But even with this strike, at 2,000 Yuan, Chinese labor is 1/6th the cost of American minimum wage labor (compare that with UAW labor costs). However, Chinese pay isn’t going to stop here, we should expect significant increases in Chinese labor costs in the next few years. Moreover, given today’s announcement we should also expect the Yuan to appreciate as well (further increasing the cost of Chinese labor costs for foreign companies).

      As the modernization and automation of Chinese manufacturing takes place we should expect an equally large reduction of jobs for unskilled labor. The Chinese are hoping those displaced jobs will be moving to higher-value, higher-skill jobs. Its a delicate balance, but a crucial one as China reaches the Lewis turning point.

      I suspect the Chinese government, along with the ACFTU, is playing a crucial role in negotiating the pay increases. Its in China’s interest to have labor costs increase in an organized manner.

  • avatar

    These strikes have got to be the shortest in history. This is like what…the 3rd strike that lasts a day or two before everyone is back at work with a pay raise.

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