Toyota, Honda Manage Global Economic Downturn

The U.S. auto industry is not alone in the struggle to sell cars. Japanese automakers also are suffering in the global economic downturn. Christine Tierney, a reporter with The Detroit News talks with David Greene about how companies like Toyota and Honda are faring.

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When we think about troubles in the automotive world, we generally think of American companies like Chrysler and General Motors. But Japanese automakers are struggling as well. Yesterday, NPR's Anthony Kuhn reported that Toyota has had to lay off thousands of temporary workers, and the economic downturn may be only part of the problem. Christine Tierney covers Japanese carmakers for the Detroit News, and she joins us. Hi, Christine.


GREENE: Toyota has not laid off any full-time workers, which is so striking to people here in the United States. Is that something you think they can continue?

TIERNEY: I think they'll work very hard to preserve the permanent work force. It's such a long tradition there, that even though it's not an implicit rule, I think it would be a major shift for them if they did have layoffs of permanent workers. They're right now doing things like cutting production so people's work hours are declining. Salaries or wages are being cut. And these things, they're doing them sort of to share the pain across the entire staff.

GREENE: Is Toyota examining how much it sort of tried to compete with companies like GM in the past, and whether they have some regrets?

TIERNEY: Toyota says they don't compare themselves to other companies, but I think they were clearly thrilled at the prospect of becoming number one. And I think that there is some soul searching at the company whether that became too important a goal, whether that overrode, perhaps some other concerns. Compared with Honda, for instance, they have been a little less cautious in the past two or three years.

GREENE: And when we talk about cautious, what did Toyota decide to do as it faced questions of competition that Honda might not have?

TIERNEY: I think Toyota expanded faster in terms of building more factories in more parts of the world. And it's difficult - I mean, even at the time, even though everything looked very, very good for Toyota at the time, people thought it's a very difficult system, the Toyota way, the ingrain it in people. Can they train all those people? Can they maintain the quality that really brought them to where they are? Can they do that while expanding this quickly? So that's been a question that's been out there for maybe three or four years.

GREENE: Well, I want to ask you about Honda. You mentioned that they were more cautious than Toyota in the good times. Does that mean they're fairing a little better these days?

TIERNEY: Yeah. Honda, also grew more slowly than Toyota in the good times. But these days, they are fairing better. They have a very different profile from Toyota. They don't make heavy trucks, for instance. They're the biggest motorcycle manufacturer in the world. So their whole model range is skewed toward much smaller vehicles. They're very cautious in making moves to go higher and bigger and build more factories. They tend to think about it more, and they tend to be absolutely kind of strapped for capacity before they build another factory.

GREENE: You're looking at this recession through the eyes of Japanese carmakers. How is this downturn different from previous economic slumps that they've faced?

TIERNEY: I think in the severity. The U.S. market, for instance, is shrinking from a market of around 16 million vehicle sales - that's all manufacturers a year - to between nine and 10. So that's for an industry that has factories and so many workers, that's a huge adjustment, and nobody can really cope well with that kind of decline. And the second thing that's very difficult this time for the Japanese is this is really a global downturn. Sales are down in every region for them, even Asia, even the emerging markets. All their regions were down last year.

GREENE: We've been listening to the voice of Christine Tierney. She cover foreign-based automakers, including those in Japan, for the Detroit News. Christine, thanks so much for being with us.

TIERNEY: Thank you.

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