Auto woes hit home across the board
Asian, European companies feel effects of sales slump

Faced with slumping sales and a vehicle mix out of sync with consumer demand, automakers are scrambling to reduce production schedules. Key plants are idle, and generous employee buyouts have reduced headcount at plants operating under capacity.

This sounds a lot like what has faced the Detroit Three car companies in the past several years. For decades, many observers have gone out of their way to blame the challenges faced by Detroit automakers on workers and their union, the UAW.

This year, it’s time to find another scapegoat. The woes of the auto industry are not restricted to U.S. -based companies and their unions. Instead, Toyota, Nissan, BMW and other firms where workers do not have unions have also had to adjust rapidly to the new realities of $3-a-gallon gasoline.

No one is immune. For many years, Asian and European firms gained U.S. market share and enjoyed wide praise for their efficiency and quality. But no automaker is immune from the latest trends in auto sales. Consumers are shifting from large, low-mileage vehicles to smaller, more fuel-efficient models.

• Toyota’s September vehicle sales in the United States fell by 32 percent compared to the previous year, with most of the decline coming in high-mileage vehicles. In response, the company has suspended production of the Tundra pick-up truck in Texas, canceled Tundra production in Princeton, Ind., and announced the layoff of 800 contract workers at a plant in southern Japan, which produces Lexus RXs and Highlander SUVs.

• Nissan, stung by a 43 percent drop in second-quarter profits, has seen its stock fall to a five-year low. The company has offered buyouts of $125,000 to 6,600 workers at plants in Smyrna and Dechard, Tenn. – home of the slow-selling Pathfinder and Xterra SUV.
Executives say Nissan’s goal is to trim 1,200 associates from its Tennessee workforce – a move that comes after 600 workers accepted buyouts last year.

• BMW, the luxury German automaker, announced 5,600 job cuts in August, on top of 2,500 temporary jobs already eliminated. The total reduction will be 7.5 percent of BMW’s 108,000 workforce worldwide.

The latest job cuts are part of a plan by CEO Norbert Reithofer to increase the rate of return at BMW. They’ll include 2,500 permanent and 2,500 temporary positions eliminated in Germany and an additional 600 jobs worldwide. The company would not say whether any cuts would take place at its U.S. plant in Spartansburg, S.C. where it produces the X5 SUV and the Z4 Roadster.

The global auto shakeup has been fueled by rising gas prices, materials costs and currency fluctuations, and a U.S. housing crisis which has suppressed consumer demand. Car makers have also been hurt by a sharp drop in the value of used vehicles, especially pickups and SUVs. Many consumers leased these vehicles. When the lease is up, they are given back to manufacturers, who have to sell them on the used-car market at depressed prices, resulting in significant lost revenue.

‘Tangle-footed’ Toyota. Even mighty Toyota – once the unrivaled darling of the financial press – is now facing criticism for its vehicle and production strategy. The Australian reported on Aug. 6 that the Japanese auto giant, “appears to have been seriously tangle-footed in the past 14 months…”

“Toyota wasn’t the only manufacturer caught short by American consumers’ belated, but dramatic, conversion to fuel conservation. But it was more heavily committed than the other Japanese manufacturers, and slower to change direction.”
What does the upheaval in the American auto industry mean for American autoworkers?

Job security in doubt? Auto jobs that once appeared secure may not be secure forever. Toyota and Nissan have, so far, avoided involuntary layoffs in their U.S. operations by taking a page from the Detroit Three and the UAW-negotiated agreement, which have reduced their workforces with retirements and employee buyouts without any involuntary layoffs. But if U.S. auto sales continue to decline, it may get harder for companies to honor their no-layoff pledge, as Toyota temporaries in Japan and Indiana have already discovered.

More pressure on wages and benefits. If Asian and European automaker profits continue to slump, the pressure to reduce wage and benefit costs, and increase the use of low-paid temporary workers, is likely to increase.

Toyota’s infamous five-year plan – made by management for management – matches wages to average area wages instead of auto industry standards. It’s fast becoming a model for the entire industry. If profits continue to fall, the five-year plan to scale back on employee compensation may become a five-month plan – or a five-minute plan!
In a union-free workplace, management is free to continue cutting wages and benefits in any way they choose. This process can only stop when workers choose to exercise their right to join together and form their own organization, to have a say in the decisions that affect their lives.

Can workers increase their leverage? For all their problems, most Asian and European companies remain in extraordinary financial health. In 2007 Toyota took in $16 billion in profits, while Nissan’s net operating income was $4.2 billion and BMW earned $5.5 billion. With healthy profits, these companies can afford to adjust to new industry realities and provide fair compensation for workers. But they are unlikely to do so voluntarily. Individual workers won’t have much opportunity to change company policies on wages, health care, retirement and other forms of compensation. Not by accident, for the first time in history, autoworkers in this country are facing cutbacks while their employers are reaping record profits.

But, if workers decide to join together and gain collective bargaining rights, it will become an entirely different story – one that American autoworkers can help write for themselves. UAW members stand ready to support their counterparts and help stop the erosion of wages and benefits for all auto workers. UAW members can no longer shoulder the entire burden themselves.