Crisis Has Toyota City in Shambles
Toyota City, Japan. For years, Toyota City prospered along with the giant carmaker that shares its name, growing into a global motor-vehicle manufacturing center as its official sister city, Detroit, slid into decline.
Toyota has spread out its orders among many factories in Toyota City, but smaller motor-vehicle-related suppliers have been left idle.
Now, the current economic crisis has halted the good times in Japan’s Motor City. Toyota Motor, the city’s largest employer and dominating presence, has mothballed factories and slashed production amid its first annual net loss in 59 years. This has pushed Toyota City into its worst slump in memory, as jobs have vanished, tax revenue has dried up and tidy downtown shopping streets have grown eerily empty. The reversal of fortune has turned both Toyotas, the city and the car company, into grim symbols of a global downturn that has spared few, including the once seemingly unstoppable Japanese motor-vehicle industry.
“In the beginning, we used to aspire to be a second Detroit,” said Tatsuya Yoshimura, the owners of a camera shop located in downtown Toyota City. “Now, that is what we are afraid of becoming.”
Many in this proud company town of 423,000 are questioning their extreme economic dependence on a single corporation, even if it is the world’s largest motor-vehicle maker.
“When Toyota sneezed, we caught pneumonia,” said Shoji Sawahira, who is in charge of the finance section at Toyota City’s city hall. “We never imagined this would happen to the world’s No. 1 company.”
Fear of the future is palpable at the local unemployment office, the optimistically named Hello Work Toyota, which has suddenly found itself overrun by the newly jobless.
Until last summer, the office sat largely empty as the local motor-vehicle industry faced a chronic labor shortage, drawing workers from across Japan and as far away as Brazil and Peru. Now, Hello Work is crowded with more than 1,000 job seekers a day who line up for hours to claim unemployment insurance or sit anxiously at computer terminals scouring a job database.
One of those who came to find work was Masahiro Tanaka, 30, who lost his job at an motor-vehicle glass factory in February. He said it was the first time he or anyone he knew had been cut in 12 years of working at motor-vehicle parts factories in Toyota City.
“The only places that are still busy are those producing for the Prius,” Tanaka said, referring to Toyota’s fuel-efficient hybrid sedan, which has remained popular despite the slump. “Everywhere else, jobs are just gone. Completely gone.”
Hello Work’s vice director, Masami Kawajiri, said 8,042 job seekers visited the office between January and March, up 133 percent from the same period a year ago. The sudden surge in job seekers has kept Hello Work’s staff working six-day weeks without breaks, Kawajiri said.
“We’ve never seen it this busy,” said Kawajiri, who explained that overwork had turned one of his eyes blood-red. “I don’t even want to think of what will happen if the economy gets even worse.”
He and others said jobs began disappearing after last summer, as collapsing global motor-vehicle sales led Toyota Motor to cut its workforce by 6,000 and slow production at its seven factories in Toyota City, where most of the company’s 72,000 Japan-based employees are. Toyota said it expected a $3.5 billion net loss in the last fiscal year, its first loss since 1950.
Many residents worry what could happen if the recession drags on. But they seem confident that Toyota City can weather the downturn in the long run. They point to a traditional ethic of thrifty self-reliance that led the city government to shun extravagant projects during the boom years, and instead set aside $719 million in emergency savings, exactly for such a rainy day.
The city retains its spotless streets, immaculate shops and nonexistent crime rate. Since the slowdown, only one manufacturing company has gone bankrupt, says the city’s Chamber of Commerce and Industry, because Toyota spread out orders among many of the more than 400 motor-vehicle parts factories in the city, to keep them afloat through hard times.
Nonetheless, Toyota’s downturn has rippled through the city’s economy, idling many smaller motor-vehicle-related suppliers, which also cut payrolls, mainly by refusing to renew the contracts of short-term workers. After losing their jobs, many of the city’s 16,400 foreign residents, mostly ethnic Japanese from Brazil and Latin America, packed up and left, residents and city officials said.
These have been wrenching setbacks for a city that has long flourished as the best known of Japan’s “corporate castle towns,” as company towns are known here. The city, about an hour east of the central city of Nagoya, changed its name to Toyota City in 1959 when the motor-vehicle company relocated here.
Despite Toyota’s dominating presence, residents say they do not expect the company to come to their rescue. A spokesman for Toyota, Paul Nolasco, said the company was not extending direct aid to the city.
“We are a major member of the community,” Nolasco said, “but we are not city planners.”
City finances have taken a huge hit from the crisis. According to Sawahira, the finance section chief at city hall, losses by Toyota and other companies drove down the city’s corporate income tax revenue to $16 million in the fiscal year ended March 31, from $442 million the year before. Personal income taxes, the city’s other main source of tax revenue, did not drop as sharply, though they are likely to fall again this year as unemployment spreads, Sawahira said.
To help offset the lower revenue, the city has cut spending on several projects, including construction of a $100 million wing in city hall and purchases of artwork for the city’s museum.
Sawahira said the drop in tax revenue, while severe, did not catch the city completely by surprise. Toyota accounts for such a huge portion of corporate income taxes — some three-quarters — that city planners had gotten in the habit of monitoring the company’s regular earnings forecasts in order to predict the size of city budgets. “Our finances closely track the company’s,” Sawahira said.
Local merchants have also joined to try to reverse both the city’s and the car company’s slouching fortunes. They introduced a “We Love Toyota” campaign in which shop owners will chip in $200 when one of their customers buys a new Toyota car at a local dealership.
“Can’t let Toyota Motor fail,” said Yoshimura, the camera shop owner. “We don’t want to have to change the city’s name again.”
The New York Times