Will Toyota Lose Its Edge?

The cost of a man-hour is creeping up at Toyota (TM). And in Detroit, new contracts will allow the Big Three to realize labor cost reductions over the next few years. BusinessWeek cites sources at Toyota who are worried about what the cost parity will mean. Will Toyota lose its edge?

But Toyota's manufacturing success has always been about a lot more than cheap labor costs. And the struggles of the Big Three go deeper than just the union/retiree issue. To suggest otherwise is a bit too reductionist. So this issue alone won't be Toyota's death knell.

I'm eagerly awaiting the take of the manufacturing bloggers out there.

Comments

[Glenn Mercer:]

Labor cost is of course important, but I would assert that you are looking at this through Detroit's lens, which is that "all problems are cost problems." If a Toyota has higher resale value than a Ford, then a Camry buyer will pay more for it upfront than for a Ford, as he or she gets the value back upon resale. The higher price allows Toyota to earn better profits or even pay its workers more. That is a simplistic point, but for decades Detroit ignored it. Look at the Sebring, with its cheap interior. Cheaping out the interior implies a belief that "Someone really wants a Sebring, so if we can cut $400 out of it, we'll sell more." The problem is, there is no huge untapped demand out there for a Sebring that costs $400 less. There MAY be untapped demand out there for a Sebring that is a nicer car. Thus Detroit may save $500 in labor costs on a car, but have to give up $2,000 in price cuts to sell it. Detroit has finally gotten the message and is now focusing on trying to raise value and thus price, not just keep squeezing costs. Toyota certainly has to watch its labor costs, but they will always do better to worry about price as long as Detroit is still fixated on costs.

2008 Apr 22 10:13 AM

[watchdog:]

Having been in the retail used car business for over 30 years, and now at Toyota I can assure you that price does not matter. I keep a small selection of domestic cars and cannot tell you how difficult it is to sell them even at thousands less than a Toyota, and clearly a better value. The mind set of a buyer today is such that no matter what Detroit makes most people will not want it, purely for the stigma, and the assumption that it will be plagued with problems somewhere down the road.

2008 Apr 22 10:48 AM

[Midas1:]

As a Toyota owner for more than 30 years and a lifetime customer, I think the difference between domestics and Toyota is that GM and Ford tell you to pound sand when you have a problem and Toyota works with you. I have had two problems when my car was not under warranty. I had a civil discussion with Toyota, proven maintenance records by master techs, and am an obvious established customer. Both times Toyota worked with me and backed their product beyond what I expected. I now own my fourth Toyota and would still be on the third had it not been totaled by an idiot running a light. Three cars in more than 30 years--the quality speaks for itself. My current Toyota is now five years old and has had some problems. However, Toyota covered the problems and it's running great. I just want someone to back their product instead of pushing what happened or didn't happen on the assembly line back on me. Until I feel some level of comfort in this regard, Toyota gets my vote and money. My 1990 Camry NEVER FAILED!!! At the time if was totaled (14 years old) it still had the original alternator. can Ford and GM offer the same?

2008 Apr 22 02:08 PM

[User 169775:]

I agree with 98101 on the reliability of the Toyotas.. Drove a Toyota for the past 10 years, and just picked up my Prius late last year.

I can go one better than 98101-- My Prius has no alternator, starter, or timing belt to go bad, and since it uses regenerative braking, it does not need a brake job until 100,000 miles. Try that in a regular car! :-)

2008 Apr 22 04:21 PM

[Gotta Ask:]

Although this blog is getting way off the subject of Man-hour costs at Toyota and more of a Toyota bragging site, I too am a Toyota owner since 1981 (26 years.... 8 Toyotas...owning several at one time).

However, I question 169775's comments about his Prius... no alternator? What do you think is recharging your batteries for when you are in the electric mode? It is not just getting charged from the regenerative braking. No starter? What is starting the 4 cyl engine that works in conjunction with the electric motors thus making it a "Hybrid" and not a straight electric car. No timing belt? what is turning the overhead cam that is pushing the intake and exhaust valves open and closed as the 4 cylinder engine that is in your Prius? I know this is a financial blog and not an automotive tech blog, but please realize your Prius still has an engine and many of the same components that other cars have. I too am quite impressed with Toyota's Hybrids (my mother has a Hybrid Camry), and think they are great with rising fuel costs, but am a bit warry of what the maintanence costs would be for long term ownership since they have not less, but more components to maintain.

2008 Apr 24 09:59 AM

[User 169775:]

Gotta ask:

The atkinson-cycle engine in the Prius is different from the Otto-cycle engines in a regular car. It does NOT have a timing belt because the valves work differently. The engine does NOT have a starter either because the normal starter/solenoid system because it relies on the Power Split Device to crank the gasoline engine to speed on-the-fly.

Also the Prius does NOT have an alternator. The Power Split Device switches the traction motors between electrical generation and torque generation depending on need.

The Toyota Hybrids are mechanically LESS complex than a normal car, including your mother's HyCam. It's the electronics that are more complicated, not the mechanicals.

Like I said, no timing belt, no alternators, no starters, and the transmission has just a single gearset. It's LESS components to maintain. You might be impressed about your mother's HyCam, but apparently you don't know much about it.

2008 Apr 24 11:20 AM

[curiouscat:]

Toyota will not lose its edge. They continually improve in many aspects. In many ways Toyota is far superior. Look at the pay of Toyota's leaders. management.curiouscatb.../ They have not adopted the obscene pay structure of most American companies. Toyota managers focus on the problems and what can be improved not trying to explain why they are great (even though they just lost a few billion this last year or two).

Toyota's desire is to be the premier employer (where employees want to work) where they are located. Toyota's management is incredibly good. I don't believe Toyota's advantage is due to lower labor costs (to any significant extent). But the long term will show whether Toyota continues there success. I believe so, and own Toyota stock.

2008 Apr 25 09:13 AM