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Toyota Idles Factories but Can’t Lay Anybody Off

August 18, 2008
Related Topics: Corporate Culture, Motivating Employees, Retention, Latest News
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They will relearn how to pick up screws. They will study safety practices. They will take classes on workplace diversity and ethics, study corporate history, clean up the mess of urban vandals and probably even plant flowers.

But one thing Toyota’s 4,500 idle North American workers will not do is get laid off.

As the U.S. auto industry sheds workers, and even Nissan offers buyouts, Toyota is sticking by its proud—and expensive—tradition of no layoffs during hard times.

“This was the first chance we’ve really had to live out our values,” says Latondra Newton, general manager of Toyota’s Team Member Development Center in Erlanger, Kentucky. “We’re not just keeping people on the payroll because we’re nice. At the end of all this, our hope is that we’ll end up with a more skilled North American workforce.”

On August 8, Toyota halted production of Tundra pickups and Sequoia SUVs at plants in San Antonio and Princeton, Indiana, for three months, idling 4,500 workers.

It’s an expensive proposition. Toyota won’t estimate the financial hit. But keeping 4,500 of its workers on the clock at full pay and benefits for 14 weeks, even at a conservative estimate of $20 an hour, would represent at least $50 million. The shutdown also means a production loss of 30,000 to 40,000 big-ticket pickups and SUVs. At an estimated wholesale value of even $25,000 per vehicle, that translates into as much as $1 billion in lost revenue.

Other complications are developing. Toyota’s assembly plants that still are producing are leery of others getting an advantage in intra-company competition for future work. So they are vying to take part in the retraining programs.

It was Newton who first received word of Toyota’s decision last month that assembly lines in San Antonio and Princeton would stop making Tundras and Sequoias. Her instructions were clear: All affected workers would remain on the clock at full pay until assembly resumes in November.

No one had developed a contingency plan, so that left Newton and her Kentucky staff with about two weeks of late-night meetings and weekend scrambling to create a plan of action.

Their solution: Move the affected workforce through a nonstop schedule of classes and training exercises aimed at improving their assembly skill levels.

Among the classes they are rotating through: safety drills, productivity improvement exercises, presentations on material handling and workplace hazards, diversity and ethics classes, maintenance education and a stream of online tests to measure and record their skill improvements.

But just as the plan got under way, things became more complicated.

In Toyota’s manufacturing system, its plants compete for each new vehicle program based on their achievements. If one plant gets a leg up on worker skill levels or safety achievements, it could sway a future decision on where a new vehicle gets manufactured.

“Our other North American plants that were not affected didn’t want to get left behind by the skill improvements, so they have asked if they could also participate in the programs,” Newton says.

Rotating the unaffected workers through skill programs will create manpower issues on Toyota’s busier assembly lines. That likely will mean that Toyota will use San Antonio and Princeton workers to relieve employees on lines elsewhere.

The automaker also is considering ways to shift Texas and Indiana workers temporarily to Toyota plants in which assembly lines are moving at full speed, such as the Camry assembly plant in Georgetown, Kentucky.

Despite Toyota’s contingencies, it is unclear that the large-scale retraining will be enough to see the San Antonio and Indiana workers through until production resumes.

The automaker says it has not decided what employees will do after completing their classes, but they probably will work in community service programs around San Antonio and southern Indiana.

That would put Toyota employees to work cleaning public parks and scrubbing graffiti from buildings around San Antonio, a company spokesman says.

And if executives can resolve logistics and safety issues, they may authorize a weeklong employee assignment to clean up the shoreline of a Texas lake.

Filed by Lindsay Chappell of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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