Toyota Finds It's Not Immune

Welcome to the wonderful world of American auto manufacturing, Toyota. It appears the Japanese car manufacturer, the darling of the industry as it climbs closer to taking over the world’s top spot, may have a major issue on its hands: how much it pays its workers in the United States. According to a report in the

Welcome to the wonderful world of American auto manufacturing, Toyota.

It appears the Japanese car manufacturer, the darling of the industry as it climbs closer to taking over the world’s top spot, may have a major issue on its hands: how much it pays its workers in the United States.

According to a report in the Detroit Free Press, Toyota officials are working on a way to trim by one-third what is expected to be a $900-million increase in U.S. manufacturing compensation by 2011.

The 42-page document was left unsecured on computers at the company’s Georgetown, Ky, plant and passed around by hourly workers. That couldn't have been good for productivity!

The Free Press quotes the president of Toyota Engineering & Manufacturing in North America as saying the company, “should not tie ourselves so closely to the U.S. auto industry, or other competitors,” and instead align hourly wages with manufacturing pay in the state where each plant is located.

They make about 10 bucks an hour to make things in Alabama, a far cry from the $30 or so Toyota is paying its folks.

The executive noted that labor costs as a percentage of sales are growing faster than Toyota’s profit margin, a condition he called “not sustainable in the long term.” (See GM, Chrysler, Ford.)

“The U.S. auto industry pays among the highest manufacturing wages in the world,” the report said, according to the Free Press. “Compared with Japan and France, the U.S. auto industry pays 50 percent higher wages and over five times more than Mexico’s auto manufacturers.”

The revelation is likely to make this summer’s negotiations between Detroit automakers and the United Auto Workers union most intriguing. On the one hand, if Toyota’s non-union employees are reluctant to concede on some issues, like raises and benefits, UAW members may feel more bargaining power. On the other, Detroit executives can point to Toyota and stress that their highly successful rival is itself seeing the need to sharply reduce manufacturing costs.

Either way, it's not likely to end pretty.

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