Monday, January 24, 2022

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    Toyota/Omicron: no work around for higher labour costs

    Japan has closed the borders of foreign tourists in the hope of keeping travelers out of the Omicron variety. This move comes at a bad time for Toyota. Vehicle production in October fell by more than a quarter year-on-year. The supply shortage that started with chips has spread to low-tech parts and the workforce.

    Production has declined for the third straight month, and sales have fallen by a fifth. Toyota was previously superior to some rival automakers, thanks to its microprocessor stockpile and strong local supply chain. However, this group and its Japanese suppliers are exposed to Southeast Asia for other parts and production.

    With the advent of new, highly infectious variants, factories in Thailand and Malaysia, which were temporarily closed earlier this year, could be closed repeatedly. Meanwhile, Japan’s border closure will temporarily block the workforce to strengthen Toyota’s depleted homeland personnel.

    The Japanese labor force is structurally declining. Temporary workers became important in dealing with supply-demand mismatches after the country’s working-age population peaked in 1998. They often cover night shifts and low-paying jobs that are not popular with the locals. A Toyota survey shortly before the pandemic found that Vietnamese workers were common throughout the supply chain. In the “Trainee Intern” category alone, Tier 1 suppliers had 6,300 foreign workers.

    Japanese manufacturers have doubled their contracts and raised their salaries by a factor of 10. However, this did not help solve the labor shortage. From Tuesday, the country is expected to announce strict restrictions on the arrival of foreigners, including new foreign workers and students.

    Labor and parts shortages are not the only threat to margins. After fuel cell vehicles proved to be a dead end for personal road transport, Toyota is spending a lot of money to catch up with battery-powered electric vehicles. It is reported that the August negotiations with local supplier Nippon Steel caused a significant price increase for automakers.

    Equities that have risen 44% over the past year represent an expensive equity valuation of nine times futures earnings. This equates to a two-thirds premium for Volkswagen, another traditional car maker large enough to survive the transition to electric vehicles. Given that Toyota relies on Southeast Asian parts and contract staff, this premium is not worth it.

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    Toyota/Omicron: no work around for higher labour costs Source link Toyota/Omicron: no work around for higher labour costs

    The post Toyota/Omicron: no work around for higher labour costs appeared first on California News Times.

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