By on February 26, 2010

The Toyota witch hunt inquiry is beginning to show its surely unintended effects – on American jobs, businesses, and lest we forget, tax revenue.

Toyota has notified its major parts suppliers that its North American production for the February-April period is expected to reach roughly 350,000 units, around 20 percent lower than the number originally planned for  in January, The Nikkei [sub] reports this morning in Tokyo.

Toyota halted sales of the eight models from late January to early February. They also stopped production at five North American plants from Feb. 1 to Feb. 5. Toyota recently decided to suspend operations at its Kentucky and Texas plants for a total of 14 days through April.

That was then, this is now. The Transportation Secretary himself has said that drivers of Toyotas may risk life and limb. The worst is yet to come – in collateral damage to American industry.

“Parts suppliers are bracing for the possibility that other Toyota plants may also suspend operations,” says the Nikkei. Toyota had figured that the  recalls will depress worldwide sales by around 100,000 units. That projection is likely optimistic. “Some in the company now see its global sales dropping by an additional 50,000 units or so, with North America taking the biggest hit,” the Nikkei writes.

In Japan, Toyota remains mostly unscathed, with sales in February jumping around 60 percent from a year earlier. All quiet also at the European front. Production in Japan is churning along at 13,000 to 14,000 units a day, well above the break-even point of 12,000 units a day.

Note: Made-in-America Toyotas vastly outnumber imported Toyotas. According to Automotive News [sub,] Toyota’s sales in 2009 were comprised of 1,106,303 units built in NA, and 663,844 imported units.

With growing apprehension, Toyota and its parts suppliers are watching North American production. At the Wednesday inquisition, Inaba’s characterization of the Corolla as “an American car” wasn’t so well understood by the panel. Maybe, a look at the unemployment numbers a few months down the road will heighten the awareness. Or result in even more protectionism.

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46 Comments on “War Against Toyota Is Devouring Its Own Children...”


  • avatar
    criminalenterprise

    Toyota has ****ed this up.

    In the 80s Audi had a problem – its drivers were stomping on the accelerator instead of the brake. Today all cars with automatic transmission have a brake interlock. You need to engineer some stupid-proofing into your product. I have two contact lens solutions, one of which may not be put into my eyes. The nozzle for this bottle is bright red. It’s one less thing to which I have to pay close attention.

    Toyota were made aware of this problem and knew it was happening more frequently than with other cars. They should have reprogrammed their ECUs with a brake override like my car and millions of other cars have.

    Instead, they’ve tried the same scattershot recall strategy that Audi used in the 80s to such devastating effect. When you run commercials assuring your customers you’ve got the fix you better damn well have got the fix.

    One of the largest companies on our planet, with a detailed lesson – at Audi’s expense – in how not to handle this exact situation can’t get their **** together and of course now people are going to lose money and jobs. A handful have lost their lives.

    • 0 avatar
      TexasAg03

      What kind of brake override does your car have that a Toyota does not? Just curious.

      EDIT:

      Just read some more comments. I did not realize there were cars with systems that cut the accelerator when the brake is applied.

  • avatar
    Steven02

    Jobs are a zero sum game. If jobs are lost here, they are likely needed at other suppliers or will save those jobs at those suppliers. Same thing with the jobs for the manufactures.

    • 0 avatar
      L'avventura

      Jobs are not zero-sum. In fact, economists have a term for this misconception; it called the ‘lump of labor fallacy ‘.

      Again and again, and again and again and again, it needs to be explained, especially to politicians, that the amount of labor (i.e. the amount of jobs) is not fixed. We’ve heard this time and again, in the 50s automation would displace workers, women entering the workplace will displacement men, foreigners, immigrants, etc. Because one individual loses a job it doesn’t mean that another wil receive one. The truth is that the number of jobs in an economy is not static and is not limited in principle or practice.

    • 0 avatar
      psarhjinian

      Jobs are not always, or even often, zero-sum. They can be if there’s pent-up demand or if you’re shifting capacity within an organization, but generally that’s not the case and certainly not the case here.

    • 0 avatar
      Steven02

      If you are talking about increasing technology/automation, then you are correct, jobs aren’t zero sum game. But if you are talking about production slowing causing job losses while others are increasing production, technology being relatively equal, then yes, it is a zero sum game.

      There are companies currently increasing production and hiring in the auto industry. These companies don’t have significantly better automation than Toyota and their suppliers.

      We aren’t talking about a technology shift here. There is also no reason to think that people who would have bought Toyota’s are waiting and not buying cars from other manufactures. This would either save jobs there or create new ones.

    • 0 avatar
      L'avventura

      Steven02, this conversation is better suited for a freshman economics class, so I don’t want to repeat a text book, but lets put it this way, say we have 2 suppliers, each makes widgets, the first supplier may require 10 jobs to make 100 widgets, the second supplier does not necessarily require 10 jobs as well; they may require 8, or 5, or even 20. Its not just technology, they may have more skilled workers, they may be using cheaper lower skilled workers, they may be better managed, different tooling, different methods, different logistics, there are a large array of variables that account for the different number of jobs required for the exact same output in the exact same industry.

      The ‘fallacy’ is to assume that the number of jobs is fixed. It isn’t, it isn’t zero-sum. There is not a fix number of jobs in the economy. This is especially true in a global economy, out of all the factors that influence the relative efficiencies or inefficiencies of production the head-count of people is one of the least important.

    • 0 avatar
      Steven02

      L’avventura,
      I understand perfectly what you are saying and you are correct that the jobs aren’t necessarily zero-sum. So, by your comments as well, the job losses here might actually not be backfiring because a competitor might require more jobs, or that competitors suppliers are more local. So, I do agree with you there, but what can you really say about the data then? Are job losses not being saved elsewhere? Are the jobs being being saved locally? No, you really can’t say. So, you really can’t assume that this “War against Toyota”, which really doesn’t even exist, is effecting jobs at all.

  • avatar
    reclusive_in_nature

    Sooooooo…. Jobs lost because of Toyota experiencing a “perception gap” is bad, but jobs lost because “GM needs to die” is ok?

    • 0 avatar
      rsajdak

      Dude. I agree completely

    • 0 avatar
      criminalenterprise

      Those are communists. Toyota only employs independent, self-actualizing entrepreneurs who build freedom into every unit.

    • 0 avatar
      OldandSlow

      A job is a job and a job in the auto industry usually pays much more than the minimum wage.

    • 0 avatar
      geeber

      Jobs lost because company is too incompetent to make cars people actually want to buy (at least in volumes and at prices sufficient to turn a profit) are different from jobs lost because legislators are seeking to make hay in an election year.

    • 0 avatar
      Mr Carpenter

      The fundamental difference between GM-Chrysler and Toyota is this.

      GM-Chrysler has not been truly profitable for decades and was actually a drain on the economy (and still is, even more so, with God only knows how much taxpayer debt/newly minted Fed money being poured down a rat-hole).

      For another fine example of how “well” this worked, look at the history of British Leyland from the early 1970’s on.

      Conversely, Toyota (and many other car companies, Hyundai-Kia comes to mind immediately) have been profitable.

      There is also the fact that “foreign” car companies have been putting jobs INTO the United States (and Canada) for nearly 3 decades, while at the same time Detroit Inc. has been intentionally sending jobs out of the country.

      Much of this stems from the stupidity of the unionist who DO believe that they are simply entitled to a wage 300% higher than similar work done by others the next town over in another industry.

      So, yes, there is a difference. In fact, multiple differences.

      In a world where business takes chances, wins or loses – the losers go away and their place is taken by someone else who is willing to try anew. It’s a hard life in reality-world.

      The problem with the government / powers that be continually picking favorites (which is pretty much well described as Fascism or Socialism – both actually much more similar than you think) is that it stifles this natural business cycle.

      Hey, if we don’t want normal business cycles, I suppose we could all go back to living in frickin’ caves and dragging our women around by their hair, eh? Which is where the survivors eventually may well end up if trends continue on as they are. Or to be more realistic, have a peek at Somalia some time.

    • 0 avatar

      No, they aren’t different. GM sells huge numbers of vehicles, many of which are very good and competent. Just as good as competing Toyota and Ford products. The issue with GM was what it cost them to do business which resulted in minimal profits. That had to be fixed and it certainly doesn’t make GM or the people who work there (more employees and US facilites than Toyota) any less important than Toyota or anyone who is employed there.

      I also don’t buy the notion that Toyota halting production at their few US plants or ordering less from suppliers would have anywhere near the same hit on our economy as letting either or all of Chrysler, Ford and GM disappear. Especially because “they deserved it”, “the UAW blows”, “oh but the use incentives!” or “the experience at some of their dealerships was awful.”

    • 0 avatar
      geeber

      TriShield: No, they aren’t different. GM sells huge numbers of vehicles, many of which are very good and competent. Just as good as competing Toyota and Ford products.

      The ones that I see matching the competition are the full-size pickups and SUVs, the Camaro, the Corvette, the CTS and full-size crossovers. Three of those – Camaro, Corvette and CTS – are basically niche products.

      The rest are also-rans (Malibu, SRX) or worse (Cobalt, Impala, Aveo). That’s not enough to keep a full-line manufacturer in business.

      The acid test is whether retail customers want to buy those vehicles in sufficient quantities and at high-enough prices to enable GM to turn a profit, not whether any of us likes them. According to recent news stories, the chief beneficiaries of Toyota’s fall from grace have been Honda, Ford and Hyundai. Chevrolet’s market share has FALLEN since this fiasco came to light.

      TriShield: The issue with GM was what it cost them to do business which resulted in minimal profits.

      Which is the result of poor management. If the sales of vehicles aren’t covering costs – let alone generating profits – then the company has a huge problem. It’s not as though GM management and the UAW woke up one morning and discovered that the corporation’s cost structure was out of line. This problem has existed for years; neither party wanted to take the hard and painful steps necessary to correct it.

      People regularly lose their jobs because of inept management or their company’s failure to respond to rapidly changing market positions. They just don’t have their companies bailed out by the federal government.

      TriShield: That had to be fixed and it certainly doesn’t make GM or the people who work there (more employees and US facilites than Toyota) any less important than Toyota or anyone who is employed there.

      The issue isn’t whether workers at any particular company are important. This isn’t pre-school, where everybody is special and gets a gold star just for showing up that day.

      The auto industry is a business, where people have jobs because enough retail customers want to buy the products at high-enough prices to enable the company to turn a profit and thus stay in business. GM failed at that task, and wouldn’t exist in its present form except for a taxpayer-funded bailout.

    • 0 avatar
      Steven02

      geeber,
      I don’t think the Malibu is an also ran, nor the SRX. Those are both competitive. GM’s trunks, SUV’s, are also competitive. You also are forgetting about the LaCrosse. When the next Cruze, Regal, and Aveo are released, there are very few also rans.

      But, that is talking about the present and the future. When GM came out with vehicles in the past 5-10 years, they were mostly competitive, but never updated. That was a big issue. Also was the issue that the vehicles were made with very slim margins. If GM was making more per vehicle, they wouldn’t have had the problems that they do today. Much of that comes from legacy costs being too high and less about actual product problems. I am not saying this isn’t GM’s fault, but GM was doing just fine selling products that weren’t the best, but management screwed up many things along the way that made have significant problems on costs. Don’t get me wrong, GM put out some very bad vehicles as well, and that hurt them as well. But from a profit/loss standpoint, it was negotiated costs that really screwed GM.

    • 0 avatar
      geeber

      Steve02, the Malibu doesn’t impress me too much, except for its styling, which is better than that of the Camry and Accord. The Cadillac SRX has been pretty much damned with faint praise by most tests that I’ve read. The LaCrosse is nice enough, but seems rather pricey for what it offers.

      The Cruze? Tests of the car in countries where it has been released have deemed it inferior to the outgoing European Focus. That doesn’t bode well for the car here, with Ford gearing up to produce an all-new Focus. At least if the car loses out, it will be to another member of the home team.

    • 0 avatar
      mhadi

      “GM sells huge numbers of vehicles, many of which are very good and competent. Just as good as competing Toyota and Ford products”

      You are basing your comments on what? Your perception?

  • avatar
    jmo

    I’d be interested to learn of the impending management shakeups. My fear would be that Toyota doesn’t have the ability to deal with the problem.

    For example – some people are optimists some are pessimists, some a risk averse some are risk takers, some a frugal some are spendthrifts. If the engineering team is lead by frugal, optimistic, risk takers then they are going to say “Spend $1.37 to add a brake throttle override? That’s crazy.” The problem is people don’t change – if they ran into a problem with the “frugal, optimistic, risk takers” they need to hire some pessimistic, risk averse, spendthrifts to over-engineer the hell out the the cars.

    Now, at some point people would start to complain that Toyotas were too expensive and over-engineered and the pendulum would swing to the other extreme. I’d argue that in GMs case even when the accountants (frugal, optimistic, risk takers) started to run the company into the ground, management wasn’t able to bring in an opposing force that put a higher priority of engineering and quality. If Toyota can clean house they will bounce back, if they can’t then they are in trouble.

  • avatar
    John Horner

    If people are buying something other than a Toyota, then there will be winners and losers in the parts supply chain, but that should mostly even out in the aggregate.

    • 0 avatar
      baldheadeddork

      Exactly. Bertel is presuming that lost Toyota sales aren’t going to go anywhere else. He’s also presuming that suppliers only work for one manufacturer, which is kinda strange.

  • avatar
    97escort

    If Mr. Schmitt is correct that Toyotas are wonderful and faultless, it seems to me that this is a terrific buying opportunity. The main reason I bought a Vibe rather than a Matrix was price. Perhaps Toyota will now price its vehicles without the halo.

    If they don’t Government Motors may turn out to be a good investment for taxpayers after all. That may be the real reason behind Toyota bashing.

    Japan regularly does the same thing with American agricultural exports. They are constantly finding fault with American beef to protect high priced Japanese beef producers. Genetically modified American corn has been under attack for years. And pork is also rejected for nit picky reasons.

    It’s about time Japan, Inc. got a taste of its own medicine.

    • 0 avatar
      geeber

      If GM had been competently run in the first place, we wouldn’t have had to invest taxpayer money into to it to keep it around.

      And doing something dumb just because someone else does it is hardly a good way to ensure growth and prosperity.

    • 0 avatar
      stationwagon

      the japanese have good reason to have high tariffs, against GMO corn and beef, but did you know that most of California´s agricultural products are exported to japan. the reason that Japanese do not buy american cars is because they do not want to buy american cars. the reason americans buy Japanese cars is because they want to buy Japanese cars. This is capitalism at work, I do not want to be in a nation that forces people what to buy. If GM wants to make more profit than toyota. It should
      1. make higher quality cars
      2. lower cost
      3. hire and employ better management(get rid of the old Detroit mismanagers)

      yes, Toyota did make a huge mistake and personally I do not like Toyota or GM cars. but I do believe in a fair market. and if people did the research on GMO foods and bovine growth hormone, one would find that both significantly decrease the quality of the food. I am anti-agribusiness but pro-farmer. The ethanol lobby wants you to think both are the same.

    • 0 avatar
      ponchoman49

      + 1

    • 0 avatar
      ponchoman49

      Agree 100 %

  • avatar
    OldandSlow

    Bertel has never stated that Toyotas are wonderful and faultless. Those attributes were however the mantra of our own mainstream media.

    Also, the dealership experience at Toyota dealer versus a GMC Pontiac dealer were night and day different during the halcyon days of incentives by GM as it bled to death. Toyota never provided its dealers with as much incentive money and inventories were more in tune with actual sales.

    That’s about to change. Look for big factory incentives this spring to move the metal.

  • avatar
    skor

    Jobs for working class people don’t count. To hell with all of them. Anyone who works an hourly job is a LOSER. The truly evolved are employed as lawyers and Wall Street bankers. The only way to fix this economy is to make sure that billions and billions in bonuses are distributed to lawyers and bankers. After they get their billions, the millions will trickle down to the rest of us, and we’ll all be millionaires any day now.

  • avatar
    Geo. Levecque

    So by buying a Vibe, which is now obsolete due to the demise of Pontiac you have done yourself a disservice in that when you go to trade that Vibe, what will it be worth as compared to a Matrix eh?

    To my mind and others, the Matrix was a better built vehicle from a more modern Factory here in Canada, even the author of the Lemon-Aid books says the same thing, I expect the reason for buying the Vibe was the zero percent financing and the longer warranty that GM(Government Motors) gave you, not because the Matrix cost more eh?

  • avatar
    fred schumacher

    There is some confusion going on here between profitability and cash flow and between market share and change in market share. Auto manufacture is a high cash flow industry.

    A company can be profitable, yet not have enough cash flow to operate, or it can be unprofitable but have sufficient cash flow to operate. Ford is in the latter condition, having mortgaged all its real estate in 2006 in order to lock in loans for product development. When the world’s economy crashed, Ford used those loans for cash flow instead of product development.

    Chrysler was profitable in the 90s. It always made a profit on its Neons, whereas, Ford did not with its Focus nor GM with the entire Saturn operation (a well loved vehicle line which was a steady drain on GM profitability). Daimler ruined Chrysler by changing the corporate operations methodologies which had made Chrysler profitable. Daimler came up with the wrong product line at the wrong time and Chrysler had to burn through its cash flow to maintain operations. After the financial industry melt down, there were no private cash flow loans to be had that hadn’t been arranged previously, as Ford had done.

    GM was still the largest producer but had been losing market share steadily since its peak, when it controlled half the market. That amount of control was not sustainable over the long term. Decline in market share was inevitable as the world’s industry matured and more manufacturers had recovered from the damages of WW II and were better able to compete. Because GM lost market share did not mean that no one wanted their cars. It still controlled the largest part of the American market.

    Toyota prioritized growth over caution and moved most rapidly into drive by wire technology without investing sufficiently in testing, monitoring and quality control. The cockiness that GM had at its peak now transfered to Toyota. When you climb that high that fast, a correction is usually in order. Welcome to the real world.

    • 0 avatar
      rocketrodeo

      “When the world’s economy crashed, Ford used those loans for cash flow AS WELL AS product development.”

      Fixed it for you. Ford’s emphasis on product development over the last four years is pretty obvious.

  • avatar
    BDB

    So we’re supposed to give Toyota a pass on making Poltergeistmobiles because doing anything about it might cost American jobs, whereas we should let GM and Chrysler fail even if it costs more American jobs because SHUT UP THATS WHY!

    • 0 avatar
      geeber

      If Toyota fails on its own because of this defect, that is one thing.

      It’s another thing entirely if sales are depressed because of publicity seeking legislators who, on national television, trumpet barely plausible stories of demon-possessed cars only stopping via divine intervention.

      And somehow I doubt that, if Toyota would have to close up shop in this country, there will be a federal bailout for everyone involved, as there was for GM and Chrysler.

      And before anyone accuses me of domestic-bashing, I thought the hearings regarding the Ford-Firestone issue were largely useless, too, and I was glad that GM forced Dateline NBC to eat crow over the alleged fuel tank issue with its 1973-87 pickups.

  • avatar
    crash sled

    Toyota sales are down, and they’re lowering their overhead, so as to sustain their business model, and remain viable. That’s as it should be.

    The Detroit 3 were foolish enough not to understand this simple process. They may all yet die, as a result.

    Toyota has acknowledged that they’ve pushed too rapidly for expansion, and these decisions seems to reflect a course correction. Whether forced by the market, or management introspection, it leads to the same result: Loss of manufacturing jobs.

    • 0 avatar
      Suprarush

      @ Crash

      I know we’ve had our differences, but Toyota didn’t TRY to become #1 in the world, they just couldn’t keep up with demand and that’s a big difference. Toyota lags in incentives and discounts, had they increased these 2 then one could argue that they were pushing for #1. They were working on a 15 day inventory when industry avg is 42 days. Hard to sustain supply when the demand is that much higher, and Toyota won’t build cars to sit in a field a la D3. They are taking the correct steps to minimize the damage as much as possible right now. But for the most part I read your posts and you seem sensible and realsitic in not only your views of Toyota but the automotive industry as well. Nice job!

    • 0 avatar
      crash sled

      Well that’s all fine and good, but my sensible and realistic observation is still that hybrids are sucking the vitality out of the automotive industry today, especially that godforsaken Prius.

    • 0 avatar
      Suprarush

      Buddy!

      Gone are the days of Race on Sunday, sell on Monday, its the 21st century get over yourself and Hybrids, they are not going anywhere unlike your mullet from yesteryear.

      Good luck with whatever it is you do!

    • 0 avatar
      crash sled

      Well, I guess the Surpra/crash axis was short-lived.

    • 0 avatar
      srogers

      So now Toyota deserves this witch-burning because they make the best hybrid?

      I may not want to buy a Prius for myself, but I admire Toyota for doing the homework and developing the technology that works reliably in the real world. How many years until any other manufacturer catches up?

    • 0 avatar
      crash sled

      No, Toyota doesn’t deserve a witch burning, for any reason.

      I don’t believe the other OEMs are well served in pursuing any technologies that aren’t economical for their prime consumers, hybrids or otherwise. Now, if you can provide something that shows this to be profitable right now, I can be persuaded otherwise. So far, I haven’t seen that.

    • 0 avatar
      Suprarush

      Crash

      You haven’t shown anyone that they’re NOT profitable, all I’ve ever heard from you on the topic is rumour and speculation which may or may not include a fact?

      Prius sales are almost 200,000/year in U.S (only half of what Hyundai sells in combined units 400,000/year)

      You can stand pat on your factless statement but I’ve seen many a Sales reps getting nice commisions when they sell them, and if “they” make money, Toyota makes money!

  • avatar
    crash sled

    Hmmmm, a minute ago I was “sensible and realistic”, but now I’m pushing “rumor and speculation”.

    Have you checked your meds lately?

  • avatar
    Suprarush

    Pertaining to this article it appeared you were having a moment, then you went and opened your mouth… no need for meds.

  • avatar
    mhadi

    It was apparent to me a long time ago – instead of working with the manufacturer, Toyota has been portrayed as a villian by the Government. If Toyota wanted to retaliate (in a similar manner than GM threatend various governments (for SAAB, OPEL, VAUXHALL) that it would shut down operations) unless it recieved cash, if Toyota wanted to, it could inform the US policy makers that production would be shifted elsewhere…

    Then I would like to see how far the witch hunt goes.

    As the proverb says, don’t bite the hand that feeds you.

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