15 February 2009

Toyota Cuts Production and Executive Compensation

Toyota is cutting North American production, cutting executive compensation up to 30 percent and offering buyouts to about 18,000 workers. They will cut production days at some U.S. factories in April — from two to eight days according to the amount of inventory at the particular plant. The change will begin in April at its auto assembly plants in Indiana, Kentucky and Texas, as well as auto-parts factories in Alabama, Missouri and West Virginia.

Toyota is also starting shorter work weeks at some plants. Hourly employees would work four hours less per week. Unionized plants in the U.S. and Mexico will not be affected, however.

“We’ve taken responsible, step-by-step actions to address this issue in recent months, and we hope the new measures will help us adjust while protecting jobs,” said VP Jim Wiseman for Toyota Motor Engineering & Manufacturing North America.

The 30 percent pay drop for executives includes a 5 percent salary cut and the eliminated bonus. Bonuses will be eliminated for all salaried and executive employees which accounts for about 10 percent of Toyota’s 30,000 manufacturing jobs in North America. Production team bonuses will be reduced rather than omitted.

The buyouts also will not be offered to workers at a Canadian plant, nor unionized plants in the U.S. or Mexico. The buyout package consists of 10 weeks of pay, plus two weeks of pay for every year of service, plus $20,000. It will be the company’s first North America-wide buyout offer.

Toyota will also eliminate salary increases for the “foreseeable future.” Toyota expects its first annual net loss since 1950. The company is in the process of eliminating 5,300 contract jobs in Japan.

Toyota is grappling with plunging demand worldwide, especially in the U.S., and a strong yen, which cuts overseas profits of Japanese exporters like Toyota.

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