Chinese Strikes: Toyota Shuts Down Largest Plant In China – Will Reopen Monday

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.