In Toyota City, the good times rolled . . . away

Below is an article from the Los Angeles Times about the hard economic times in Toyota City, Japan's Detroit. Japan is not used to this type of job insecurity. But I guess when a company has its first annual net loss in 59 years, job insecurity is not a surprise.

http://www.latimes.com/news/nationworld/world/la-fg-toyota-city22-2009mar22,0,6539982.story

From the Los Angeles Times

In Toyota City, Japan, the good times rolled . . . away

The ultimate company town thought it was immune from economic downturns. But that was before the global recession hit and the automaker started slashing jobs.

By John M. Glionna

March 22, 2009

Reporting from Toyota City, Japan — When times were good and the auto business hummed along like a finely tuned engine here in the Detroit of Japan, this tightknit company town was considered a workers' utopia.

City officials were the envy of the nation, nursed by a paternal multinational firm that paid generous wages and showered the community with perks such as a top-notch sports stadium, concert hall and art museum -- all carrying the Toyota brand name.

That was before the worldwide economic pileup that brought widespread personal wreckage to the hometown of the world's mightiest automaker.

Unlike in Detroit, where years of steady decline preceded the current financial crisis, Toyota City's fortunes went from cruise speed to brick wall. Regarded a model of economic prosperity, it endured an unthinkable drop from first in the country to worst in less than nine months.

In this community three hours southwest of Tokyo, it's a phenomenon known as Toyota Shock.

"Toyota City is hurting," said Norio Seki, general director of the city's industrial labor division. "We're in trouble."

Last summer, Toyota was just months away from overtaking General Motors as the world's biggest car company. Jobs were plentiful here in Toyota City, where 80% of workers are employed in the auto industry.

Then Japan slumped into recession. Exports in the world's second-largest economy plummeted at a record pace, and domestic demand dropped alarmingly.

Mammoth blue-chip firms such as Toyota and Sony weren't exempt from the financial carnage. Even before announcing last month that it was facing its first annual net loss in 59 years, Toyota had begun an unprecedented production slowdown that called for reduced shifts and 10-day closures at its 12 domestic plants.

It also fired 9,000 contract workers -- more than 10% of its 85,000 employees -- and warned that more firings could follow, even among once-protected full-time workers.

As a result, Toyota City saw its number of available jobs fall more than 50% between October and December compared with the same period of 2007, officials say.

January brought more bad news: The number of job seekers soared 130% from the same month in 2008, from 1,489 to 2,627. That brought Toyota City unwanted attention as Japan's most out-of-work town.

"There used to be so many jobs we couldn't fill them all, but that all dried up overnight," said Masami Kawajiri, director of a federal job center in Toyota City. "Now our only choice is to do our best for job seekers, one by one. To think about them all at once would be too overwhelming."

City hall has fared no better: Officials predict a 96.3% drop in the corporate taxes they'll collect this year, a loss that jeopardizes city services. The Aichi prefecture government, which relies on Toyota for one-fourth of its corporate tax revenue, is projecting a $1-billion shortfall in 2009.

For its part, the automaker can only watch the decline of its home city as its scrambles to climb out of its own financial hole.

From an operating profit of $37 billion last year, Toyota expects a $5-billion loss for the fiscal year ending March 31. The company is also seeking government loans to hold off private investors demanding as much as 50% in interest on the company's debt.

"We know Toyota City has been hit on the chin, and we feel a responsibility to the community," said Paul Nolasco, a Toyota spokesman in Tokyo. "But here's an indication of how cloudy our situation is: We haven't even come up with a global production and sales plan for this year.

"We usually release that in December, but here it is March and we haven't done it yet. That's the biggest indication that we're still looking for direction."

Hurting just as much are hundreds of smaller companies here that supply the Toyota colossus with the parts to construct its cars, including mufflers, door parts, windshield wipers and headlights.

In a city where one-third of the 1,400 employers are auto-related, many of the firms say Toyota's production cuts will cause bankruptcies unless they too can qualify for government loans.

"We have no way to make the situation better -- we just have to wait and see what happens with Toyota," said a manager in a car window parts company who asked not to be named. "People are afraid to talk because they are afraid of Toyota, but we're all very nervous."

Toyota City's downturn baffles residents. After all, this was the home of Japan's largest company. Financial woes might be a reality in other parts of Japan, but not here.

"This thing took us by surprise," said one former Toyota employee who declined to give her name. "Who would have ever guessed that recession would come home to roost here? This is a car town and the world needs cars, right?"

Toyota City is a somewhat isolated community on the last stop of a subway line based in the nearby bigger city of Nagoya. Most people here support the hometown company and drive Toyotas.

Not far south of downtown sits the automaker's massive complex of factories and research and development centers. It carries an air of big-brother mystery, even among locals.

The main gate is guarded, and a visitor who tried to take pictures from the public street was quickly shooed away.

The city has the typical signs of stress: plummeting property sales, empty storefronts and restaurants. But there is another commodity that the town has lost to the recession: foreigners. The representatives from Toyota suppliers and customers from the U.S. and Europe who used to pack downtown's hotels are gone. Some say occupancy rates have dropped 90%.

For 13 years, Kevin Yuhara has run his tiny restaurant-pub in the heart of downtown, catering to foreigners who did business with Toyota. The U.S. college sports memorabilia, collection of Toyota caps and Polaroids covering the walls capture the atmosphere of drinking and laughter of the mostly American clientele.

Now the place sits empty, except for the occasional Japanese customer.

"For more than a decade, we had some good times here," said Yuhara, standing next to a flying-pig toy hanging from the ceiling. "But now the party's over, the town's major company is hurting, and the foreigners have all gone home."

At city hall, faces are grim as officials look for answers.

Seki, the industrial labor division head, said Toyota City and Detroit have for years been "sister cities" and share several cultural exchange programs.

Though he has never called his counterpart in Detroit for advice, Seki says there are many questions he'd like to ask. The economic malaise has prompted officials to reconsider the city's future as a one-company town, he said.

"I'd like to know how they handle unemployment at this scale," he said of Detroit. "I'd like to know what other industries they are looking into. How can you use the technology used in the auto industry for other kinds of enterprises?"

Seki says the two cities are different in key ways. Unlike most American workers and employers, Toyota City and its citizens have savings they hope will see them through the hardest times.

Toyota City has remade itself before, locals say. During the Depression, the city was a silk production center named Koromo. The stock market crash destroyed the industry, so an ambitious loom maker named Kiichiro Toyoda turned to automobiles instead.

Nobody here expects that another such drastic personality change is in Toyota City's future.

"In the long run, we don't think the auto industry will fail," Seki said.

"Humans drive cars. It's what they do."

john.glionna@latimes.com