Foreign Automakers Take a Different Tack with Employee Layoffs

As the global automotive industry faces unprecedented crisis, nonunionized plants in the United States owned by foreign automakers have taken a different approach to employee layoffs, prioritizing permanent workers and reducing temporary staff. Unlike U.S.-based automakers, foreign companies such as Toyota, Honda, and Hyundai have continued to pay their permanent employees, albeit at reduced rates, and have focused on training and plant activities instead of layoff-induced downsizing.

Key Takeaways:

• Most foreign-owned plants in the United States have reduced production and eliminated temporary workers, with some offering buyout packages to older employees.
• Toyota Motor Corp. has eliminated tens of thousands of temporary workers, idled plants, and altered production plans, but did not lay off anyone.
• Honda Motor Co. has cut its temporary workforce, implemented rolling shutdown days, and offered retirement incentives to its workers.
• Foreign automakers have reduced labor costs by keeping permanent employees on the payroll, despite reduced hours and pay.
• Despite concessions from the UAW, foreign automakers continue to have advantages in labor relations, saving thousands of dollars per vehicle.
• A recent study suggests that foreign automakers will build more cars, pickup trucks, and SUVs in North America than domestic automakers by 2012.

Statistics:

• The world's largest automaker, Toyota Motor Corp., posted its first annual loss in 70 years.
• Toyota has cut hours and pay for its hourly workforce by 10 percent.
• The Grant Thornton study predicts that foreign car makers will increase capacity by 20 percent to over 8 million units by 2012, while domestic automakers will reduce assembly capacity by 35 percent to 7.5 million vehicles.
• BMW of North America LLC has expanded its U.S. factory in South Carolina to produce the X3, with a total investment of $750 million.
• Toyotas exports to the U.S. were down 27 percent, EU exports were off 25 percent, South America exports were down 29 percent, and Central America exports were off 27 percent in the latest quarter.

Sources:

• "Workers at Non-Union Plants Hold On, for Now" by Michael S. Rosenwald, The Washington Post, October 16, 2008.
• "Toyota Posts First Annual Loss in 70 Years" by Naoko Fujii, Bloomberg, May 22, 2009.
• "As Foreign Automakers Gain, UAW Waits for Its Turn" by Nathaniel Popper, The New York Times, October 19, 2008.
• "Report Sees Foreign Automakers on the Rise" by Steve Matthews, Bloomberg, October 15, 2009.