January 6th, 2009
09:53 AM GMT
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TOKYO, Japan - When you have too much inventory, you need to clear it out. That's fairly basic stuff of managing any business, whether it's your corner meat market or a multi-billion-dollar corporation.

If you have too many cars, you have to stop making them.
If you have too many cars, you have to stop making them.

Toyota Motor Corporation is experiencing such basics of running a business. American consumers don't feel like buying, resulting in a Toyota U.S. inventory surplus that's double what it was just one year ago. So if you have too many cars, you have to stop making them.

Toyota announced all of its 12 owned and operated factories in Japan will stop running for 11 days, spread out over the months of February and March. This rare move by Japan's number one automaker is on top of three previously announced days of work stoppages in January. For those designated days, Toyota will stop building cars.

Toyota's spokesman Paul Nolasco says the stoppages aim to accomplish two things: Bring output in line with demand and avoid more layoffs. Toyota says it will be forced to fire 3,000 temporary workers by the end of 2009, but hopes to save the jobs of full-time employees.

This was unthinkable just a year ago, when Toyota was noting record profits. What a difference a year makes. Yet industry analysts say Toyota is still better poised than its American and worldwide competitors to ride out this global recession. So if things are this bleak at Toyota, analysts say this bodes poorly for everyone underneath Toyota, including all the raw material suppliers and subsidiaries.

"The best thing about 2008 is that it's over," said Jim Lentz, president of Toyota's U.S. sales unit in a conference call announcing U.S. sales figures. It's a sentiment shared by many in Japan's export-driven economy. Unfortunately, 2009 is already getting off to a rough start.

Watch me discuss the problems facing Toyota

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soundoff (11 Responses)
  1. Mike

    It's not a secret that the auto sales are going to be gloom and doom over the next few months.

    It's how you deal with the drop in demand that will help you weather the storm hitting the US and the world.

    So I think the Japanese carmakers are making the right choice in making near-term sacrifices for the benefit of the group. That is being responsible unlike some US carmakers who thinks pumping (and burning) more money to invest and pump up demand with 0 interest loans is the way. That my boy only digs them a bigger grave and burn taxpayers' money.

    Just my two cents.

    January 6, 2009 at 10:48 am |
  2. threpwood

    you have to see tons of the poor homeless in Tokyo which were cut by these japanese car manufaturer, especially Toyota. these workers are now out of jobs without food nor money.

    japanese car makers are not exactly making the right moves by saving their own ass for the sake of their workers. yes, american automakers uses tax payers money, but it was for the sake of their workers who are tax payers and american citizen as well.

    in my opinion, japanese automakers are irresponsible. this is an opinion from a japanese that leave in japan. just my 2 cents.

    January 6, 2009 at 1:22 pm |
  3. David

    Poor planning on Toyota's part. Since 2003, gas prices were creeping up in North America to peek in 2008. Toyota focused on bigger engines for North America and smaller for Europe. They ignored actual data, an "Old-school Toyota" No-no.

    Toyota got caught trying to beat GM for the number one in Sales, that's all. I saw somewhere on the internet a quote from Eiji Toyoda (90+) that in the 50's he thought Toyota could beat GM. Must be why he's been against the Big-3 selling cars in Japan.

    With this in mind, If you compared website sales prices for the same base model cars sold in Japan vs. U.S. you would notice about a US$4,000 cheaper for a Camry, regardless of a 105JPY or 120JPY to the JPY/USD exchange rate. Toyota was not the only Japanese car mfg doing this, but the widest difference in price. a Lexus was US$12,000 lower in the U.S.

    That's not all, problem-solving skills are lacking in the Management level. Twelve years ago they changed promotion from age based to performance based. The result was out with apprentice-style advancement and in with a "Yes-Man" management that has very little accountability. This became very apparent to me while I was at Toyota-Kyushu, Toyota's most de-centralized operating (Lexus) plant that just posted a significant loss for the first-time in its 15+yr history.

    It's good to be supporting my country's auto-industry once again.

    January 6, 2009 at 2:10 pm |
  4. Michael

    Its a pity they are not in F1 anymore.

    January 6, 2009 at 4:23 pm |
  5. Denis Brown

    It's been a classic case of pure short-sightedness from the C.E.O's down. It really doesn't take too much brains to keep your finger on the pulse.

    But the truth of the matter is when you get greedy people who are only interested in profits and boosting revenue what in effect you're doing is taking your eye off the ball in your business, and that is the where it's all fallen down.

    Back to basics is where these people need to start from. Get back to the drawing board, it's not about what to design next it's about listening to what your public wants. Yes it will hurt you at first but it will mean you will get your customer back on your side, and learn from the fact you can't be complacent anymore and you really do need to think more mid-term to long term, build and keep yourself in the black.

    The biggest single problem which will decide whether you survive or go bust is your ability to act swiftly decisively and effectively. Without taking drastic unheard of measures that others would label as risky will ultimately decide whether you are going to be a survivor or a statistic.

    It's harsh but it's across all industries that this applies to, it's not just the motor car industry that is at risk it's every industry and it needs to be recognised, it's global. Here in the UK, we are going through similar and we are going to be reeling from it's effects later this year. Our major problem is bureacracy which will be our own undoing. It's the red tape that slows our ability to react to any given situation and it's a common problem found all over the world.

    Which can be clearly seen when we hit a major crisis, our ability to react is often hampered by red tape in dealing with the matter effectively. We need to look at making decisions far more easier rather than complicate what on the surface is simple and a straight forward solution. We've got so smart that we introduce a million and one other aspects and before you know it we've got a major headache brewing with no solution in sight.

    We have smart people who need to be able to have the freedom to deal with those matters swiftly and without all the other committees and whatnots that can't make a decision to save their lives, whilst others are losing theirs.

    So I hope someone in a position of authority will have the sense to see what's being said and will not only act on the above but will in effect start ruthlessly turning around their position in order to save their business from doom.

    January 6, 2009 at 5:25 pm |
  6. earle,florida

    Just one question. Would Japan fire 3,000 "Temp's" if they were employed in Japan? Never mind that, would they dare hire Temp's to begin with? I doubt it ! This type of," business personel management employment ", is unique to the United States, thus creating a rationale in all manufacturing areas for failure,...

    January 6, 2009 at 7:37 pm |
  7. Andrew

    I see that Volvo are also having a huge downturn in orders of trucks. Down 96%. Who can survive such savagery? I contend that the Financial Crisis of 07/08 will turn into a dismal Economic Crisis in 2009 and beyond. (www.goldsilver.com)

    January 7, 2009 at 8:15 am |
  8. Nam(South Korea)

    I think this is a last phase of the recession.

    The global economy will slowly recover.


    January 7, 2009 at 8:59 am |
  9. Lamin Fofanah Gbla

    CNN & The Obama Team
    Please consider other great pastors to join in support of Pastor Rick Warren on the Inauguration day. January20,2009, so that true American Glory will be restored onces again for the Americans and the rest of the world.
    God Bless You.

    January 7, 2009 at 9:04 pm |
  10. Paul Harris

    Toyota reported last year that they were already noticing the Japanese young generation were more interested in the internet than in cars. The automobile has been mankind's favourite toy for many, many years but as that famous song from the Eagles says "There's a new kid in town!" When I was teenager my car was my first private space and my key to freedom but the world has changed! Surfing has nothing to do with the Beachboys anymore.

    January 8, 2009 at 7:49 am |
  11. Michael Turner

    I find this in part mostly the car indistries fault.I worked for a Chevy dealership in Missouri and got laid off.They charge to much for their products that are cheaply made.

    January 9, 2009 at 10:37 am |

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