Toyota asks truck suppliers: No layoffs

Lindsay Chappell
Automotive News
September 15, 2008 - 12:01 am ET

Toyota suspended production of the Tundra pickup and Sequoia SUV for
three months, starting Aug. 8, because of poor sales. Now the
automaker is asking suppliers to refrain from laying off their
employees during the suspension.

The shutdown of the Tundra and Sequoia assembly lines has cost
suppliers millions of dollars.

On Aug. 27, Toyota executives met with suppliers in Erlanger, Ky., to
spell out their request. One supplier executive who attended the
meeting described the audience as "eerily quiet" during the
presentation.

One supplier, Toyota-controlled Denso International America Inc., is
complying.

"We haven't laid off anyone, and we're doing everything we can to
avoid it," says Julie Kerr, spokeswoman for Denso International
America. "That's our philosophy as a company. This situation will
eventually turn around, and when it does, our work force will be
ready."

Staying busy

While Toyota's Tundra pickup plant in San Antonio is shut down,
employees of Toyota suppliers are keeping busy by
. Studying ways to improve efficiency
. Receiving skills training
. Taking English and Spanish classes
. Working part time at SeaWorld San Antonio
. Taking management classes
. Pursuing high school degrees

More training

Toyota wants suppliers to keep their workers engaged in training and
other nonproduction activities. U.S. suppliers say Toyota is not
offering to pick up the tab for doing so.

"We told them that this is a short-term issue," says Chris Nielsen,
vice president of North American purchasing at Toyota Motor
Engineering & Manufacturing North America Inc. "We said we're still
optimistic for the mid- and long term, and we encourage them to be the
same way."

Toyota is practicing what it preaches: It is keeping its idled workers
on the payroll at San Antonio and Princeton, Ind. Toyota has not
disclosed what it is spending to keep about 4,000 employees on the
clock.

Feeling the squeeze

Clearly, the U.S. sales slump is squeezing Toyota's suppliers.

In July, Denso Corp. trimmed $140 million from its global net income
forecast for the six months ending Sept. 30. It cited production cuts
by Toyota and other U.S. customers, which include the Detroit 3.

Most of Denso's North American manufacturing is centralized at large
plants in Tennessee, Michigan and Arkansas and in Canada and Mexico.
Denso is Toyota's primary supplier for electronics and heating and
cooling.

Toyota's key global interiors supplier - Toyota Boshoku, which is
partly owned by Toyota - has told analysts that the three-month
shutdown of Tundra and Sequoia production will cost it $80 million in
operating profits.

Another affiliated Toyota supplier, safety and switch producer Tokai
Rika Co. Ltd., recently revised its forecast to show a 33 percent
decline in operating profits for this fiscal year, in part because of
Toyota's production cuts.

Texas helps suppliers

The suspension of Tundra and Sequoia output in San Antonio and
Princeton, Ind., is hitting San Antonio suppliers hardest. Toyota has
21 component suppliers operating on the San Antonio assembly plant
site, with about 2,000 workers among them, exclusively for the Tundra.

Berto Guerra Jr., CEO of Avanzar Interior Technologies Ltd., and his
partner, Johnson Controls Inc., employ 600 people in Toyota's San
Antonio plant, producing seat frames, headliners and other parts.

All 600 now have a schedule of three days in the plant, with pay, and
two days off work, receiving full company benefits and two days of
unemployment compensation paid by Texas.

Guerra encouraged the workers to use their days off and weekends to
take part-time jobs, and some are now working at SeaWorld San Antonio
and building all-terrain vehicles at a nearby company.

"JCI and I looked at the cost of keeping everyone on the payroll
through this, and I said, 'Just consider how expensive it would be to
lose any of our people, not to mention the cost of bringing everyone
back and retraining them in November,' " Guerra says.

Avanzar, a first-time automotive supplier, is using the downtime to
seek efficiency improvements and to help workers develop new skills.
Guerra arranged for employees to take free classes during their three
days in the plant.

"We're uncovering a lot of efficiency gains out of all this," Guerra
says. "We're actually going to come out of it a stronger company."

Toyota's Nielsen toured suppliers' operations on the San Antonio
campus last week to observe their employee improvement programs.

Says Nielsen: "They're in exactly the same situation we're in, and
we're making an effort to share ideas on how to gain ground during
this period."