Kaizen or "Greedy"?


    Toyota sweats U.S. labor costs

    Another article about the report that was taken from a Toyota computer, this time focused on Toyota's concerns about rising labor costs. You might call this healthy level of desire for continuous improvement, always striving to get better.

    One employee (who supports UAW representation) says:

    “Now I can understand if the company is having a hard time,” said Harper, who has been off work for 12 weeks while healing from shoulder surgery after an on-the-job injury. “I'm more than willing to work with that company to keep my job. But when they just take it because they want more, I don't agree with it at all.

    You'd think that the employee would be somewhat thankful that Toyota is trying to make sure they don't end up in the same position as GM is in today because GM gave away unsustainable pay and benefit packages.

    In a memo to workers at the plant after the report was circulated, Toyota noted that workers at Georgetown earned $3 an hour more than the U.S. auto industry standard. The Free Press reported last week the workers averaged $30 an hour, including bonuses.

    Currently, the median for comparable manufacturing jobs in Kentucky — half earn more, half earn less — is $12.64, according to the U.S. Department of Labor.

    Toyota's strategy resembles what Hyundai Motor Co. uses at its plant in Montgomery, Ala. Assembly workers there make $14 an hour, about half the wages, bonuses and benefits of Toyota, Honda, Nissan and Detroit's automakers. But Hyundai's wages still are considerably higher than for comparable Alabama jobs, which pay $10.79 an hour.

    I don't see where Toyota's strategy is like Hyundai's at all. Toyota seems to have purposely “overpaid” in order to attract and keep excellent employees (and to keep the UAW at bay). Hyundai seems to be going for a “cheap as possible” strategy, at least compared to Toyota.

    A UAW rep at the Toyota/GM NUMMI plant (which does have UAW representation) put it more bluntly:

    UAW Local 2244 President George Nano, who represents members at Fremont, the only plant where Toyota managers must negotiate with the UAW, said Toyota is just being greedy.

    I guess that's one potential backlash against Toyota and their success, particularly as they move into the #1 spot… Toyota's nature is to keep pushing for more and more profit, but when will other stakeholders say “enough?” I hope this backlash doesn't lead to Toyota slowing their North American factory expansion.

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    Mark Graban
    Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


    1. UAW negotiation tactics 101. Public statements that are divisive and play on the publics sense of moral good.

      Hopefully Toyota learned from the mistakes made by the US automanfacturers in dealing with the UAW.

    2. Have you seen the articles talking about Japanese labor costs for Toyota. I think I might be missing something but they seem to be talking about giving bonus of over $20,000 to every worker.

      “It will be difficult to meet the union’s demand in base pay,” said Toyota Executive Vice President Mitsuo Kinoshita. “We’ll try to meet their demand in bonuses”

      From http://www.bloomberg.com/apps/news?pid=20601101&sid=a.ftKgIkTuBQ&refer=japan
      also see http://www.automotiveworld.com/WVMA/content.asp?contentid=58337

      I don’t quite get how a $21,000 bonus is fine but a $12 monthly increase is difficult. It seems to me the reporting has to have something wrong.

      I can understand the advantage of paying large amounts in bonuses when times are good so that labor costs are more variable than they would be with base salary increases. So bonuses are a way to make layoffs less necessary – if you can reduce labor costs without layoff by just lowering the amount of bonuses.

      The article mentions Honda and Nissan are both being ask for bonus in excess of 6 months base pay.

    3. It looks like a great idea. Monthly wages remain stable if a downturn does occur.

      I read though that these bonuses were for Japanese unions and not for the US labor. I’m not sure that sit very well with US labor.

    4. As a company owner/manager, I would think bonuses are a much better alternative to base pay increases. Base pays stays forever, but bonuses are at the whim of profit. By giving fat bonuses instead of base pay, it seems like a strategy to get employees on the same wavelength as stockholders. Everyone wins when profit is maximized. When profit is low, everyone loses. I hope the net effect is that you don’t have an employee who shows up to collect a paycheck and gives no care to whether or not his job benefits the company.

    5. Mike,
      I agree and really like the bonuses concept. Only caveat is if a company is successful and wants to grow through a self funded approach, would they be able to give out the bonuses or would the company be thought of as stingy by its employees when they did not receive the bonus?

      What I see though are those people that do not care whether or not the job benefits the company, they just want a job. The key is to identify these type of folks up front & not hire them.


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