Toyota Motor's union apathetic about wage increase

SOUTHFIELD, Mich. October 29, 2002; Doron Levin writing for Bloomberg News reported that year in and year out, Toyota Motor Corp.'s workers in Japan could expect wage increases. The gravy train is over, at least for now, as Japan's auto industry clamps down for hard times.

While the freeze in salaries isn't entirely startling, the employees' volunteerism is sure to raise eyebrows in the West: Toyota's employee union on Oct. 5 said it may not even ask for a wage increase at the annual negotiating conference this spring.

Instead, Toyota's union -- which helps set the pattern for the rest of Japan's auto industry -- is likely to seek a bonus. A bonus is easier to trim in the event that tougher conditions materialize. Toyota management has signaled it prefers this method of giving raises to its 62,000 employees.

Japanese auto unions have always been less adversarial than their counterparts in the United States, Canada, and Europe. Still, the latest gesture by workers is unusual, because Toyota appears to be sailing along, winning new customers in markets where they had been weak, such as Europe.

More to the point, Toyota is a solid moneymaker. Its operating profit for its fiscal year ended April 1, 2002, increased 38.3 percent to a record $8.2 billion. For the Japanese industry overall, vehicle exports from Japan fell 6.5 percent in 2001, to 4,166,169.

Two factors, a weak Japanese economy and the prospect of China producing vehicles, are worrying Toyota executives. If wages at home keep climbing, they fear Japan-based plants won't be able to compete with those springing up across China.

Because Japan is an export-oriented economy "Japanese unions have been very well versed in conditions overseas," said Robert Cole, professor of business administration at University of California at Berkeley. "They know what it takes to succeed."

Japanese unions, like Toyota's, have operated since their founding on the principle that long-term security is more desirable than short-term economic gain.

In the last several years, though, Toyota -- Japan's No. 1 producer -- has been forced to cut productive capacity in its home market to between 3.3 million to 3.5 million units annually from a peak of 4.2 million; capacity could contract even more as production expands into China and elsewhere.

Through the 1990s, labor productivity improved about 8 percent annually in China, the highest rate in the world, while Japanese productivity improved an average 1.3 percent, 30th in the world, according to the Japan Productivity Center for Socio-Economic Development.

At last spring's annual negotiating session between the unions and employers, Hiroshi Okuda, Toyota's chairman declared: "Improved productivity and wage hikes have become detached from each other in the past ten years."

For Toyota and other Japanese firms, the ability to control wage and benefit costs through voluntary union concessions makes firings less likely. In part because Chinese wages are one-thirtieth of those in Japan, it won't be long before exports begin. (Rumors are swirling in Detroit about a Chinese-made engine General Motors wants to export to the United States.)

On Oct. 15 Toyota won approval from the People's Republic to build its second auto plant in the northern Chinese port city of Tianjin.

The average annual wage of an auto worker in Japan is about 5 million yen ($40,200), consisting of an average salary base of 330,000 yen per month and an average annual bonus of about 1 million yen, according to the ministry of Health and Labor.

That's comparable to the lower end of wages for a U.S. auto union member, which can be at a low of $40,000 to $50,000 and as high as $80,000 or $90,000 with skill ratings and overtime.

In North America, union wages in final-assembly automotive plants are as much as 50 percent higher than manufacturing wages in other U.S. industries; yet the auto unions, using the threat of strikes, have continued to push the wages of their members ever higher.

Canadian autoworkers over the past two months just approved a new three-year wage pact that includes wage increases of 3 percent in each of the first two years and 2 percent in the third year. A year from now the United Auto Workers is scheduled to negotiate with Detroit automakers; increases could be as much or more as in Canada.

North American auto unions, by contrast, have concentrated on improving the economic conditions of workers, at the expense of long-term employment. UAW membership today stands at roughly half the 1.5 million level of the late 1970s.

The UAW and CAW have been willing to grant concessions in an emergency. In the early 1980s, when the Chrysler Corporation teetered at the edge of bankruptcy, they were willing to grant the company wage concessions to help the automaker recover.

Yet U.S. managements "have done a rotten job educating employees about the competitive situation worldwide," said Cole.

Maybe so, but it's hard to imagine that if the UAW and CAW had received more specific and detailed information they suddenly would have been willing to moderate wage demands.

General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group now are groaning under the weight of bloated employee and retiree costs. It's a malady Toyota and its union are avoiding in their climb to dominance of the world industry.