Toyota Motor Corp. must hold down growth of its U.S. manufacturing wages and benefits, which are among the highest in the auto industry and are growing faster than the company's profit margin, according to a high-level company report obtained by the Free Press.
The report from Seiichi (Sean) Sudo, president of Toyota Engineering & Manufacturing in North America, said Toyota should strive to align hourly wages more closely with prevailing manufacturing pay in the state where each plant is located, "and not tie ourselves so closely to the U.S. auto industry, or other competitors."
Sudo's report to top managers said the Japan-based company projected a $900-million increase in U.S. manufacturing compensation by 2011, and human resources officials were working on trimming that by one-third.
The drive to hold down costs may boost UAW organizing efforts, if Toyota workers balk at the possibility of smaller raises, reduced benefits or greater demands for productivity gains. But the plan also illustrates that the world's most-profitable automaker is going to keep relentless pressure on Detroit and its signature industry.
The root of Sudo's worry: Labor costs as a percentage of sales are growing faster than Toyota's profit margin.
"This condition is not sustainable in the long term," he said in the report.
But Toyota's plans to restructure wages and benefits may also embolden Detroit's struggling automakers, which will seek billions in concessions this summer during contract negotiations with the UAW. A recent Detroit Free Press-Local 4 Michigan Poll found that three-quarters of Michiganders say the UAW will have to make concessions to General Motors Corp., Ford Motor Co. and the Chrysler Group.
