Exclusive-Toyota repeatedly halted Mexico plant after suppliers hit by worker shortage, sources say

Published 05/17/2024, 03:03 AM
Updated 05/17/2024, 03:07 AM
© Reuters. FILE PHOTO: A Toyota Tacoma is seen during the New York International Auto Show, in Manhattan, New York City, U.S., April 5, 2023. REUTERS/Andrew Kelly/File Photo
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By Maki Shiraki

TOKYO (Reuters) - Toyota Motor (NYSE:TM) was forced to repeatedly halt production at a Mexico plant in February and March after local labour shortages snarled output at suppliers, according to people with knowledge of the automaker's operations.

The stoppages, details of which were corroborated by documents from Toyota and suppliers reviewed by Reuters, illustrate a potential choke point for the world's top automaker, which plans to produce 10 million vehicles this year.

Toyota halted production for a total 19 days in February and March at its plant in Tijuana, Mexico, where it makes the Tacoma pick-up truck, according to two of the people. Technical issues at the plant were also a factor in the stoppage, they said.

Reuters spoke to four people at suppliers and Toyota. All of them declined to be identified because the information has not been made public.

Toyota is now working with some suppliers to ease the strain. Still, some parts makers are barely managing to keep production going because of the worker shortage, one of the people said.

The supply disruptions are the latest headache for the Japanese manufacturing giant, which has also been dealing with the fallout from a safety test certification scandal at subsidiary Daihatsu, as well as separate governance issues at two other group companies.

Those scandals have prompted the automaker to delay the start of the production of electric vehicles in the United States by six months to around June 2026, two of the people said. The EV delay was previously reported by Japanese media.

In response to questions from Reuters, Toyota Motor North America, the automaker's subsidiary, said: "Toyota's North American plants continue to face intermittent production delays due to supply chain disruptions. To minimise the impact, our teams are working diligently to do everything possible to lessen the inconvenience to our customers."

'FREQUENT HALTS'

In a letter to its North American supplier network in late April that was reviewed by Reuters, the automaker acknowledged the "frequent production halts" that were causing "inconvenience and concern".

At some suppliers, it said, regular employee turnover had lead to a decline in skills, while production capacity had decreased "due to issues with personnel, equipment and material supply".

The automaker requested details from parts makers on their challenges in North America and what kind of support they required.

Reuters was not able to determine whether the labour issues were hitting the suppliers of other Japanese automakers producing in the United States.

The supply-chain issues help explain some of Toyota's recent difficulties in the United States, even as it sees increased demand for vehicles, particularly hybrids. Toyota is expected to start selling a hybrid version of the Tacoma in the United States this year. "There were some operational issues involving parts makers, and it became clear in the fourth quarter that production was not going as expected," Yoichi Miyazaki, Toyota's chief financial officer, said at an earnings briefing last week, adding that the automaker was also impacted by one-time costs related to production changes.

Last week Toyota booked a 27.5 billion yen ($176 million) operating loss in North America for January-March, although overall, it delivered record earnings.

Toyota has forecast a 20% profit decline in the current financial year, citing investments in both suppliers and strategy.

Robust economic growth in North America and rising wages have meant higher turnover as workers leave jobs in heavy industry for those with better conditions.

© Reuters. FILE PHOTO: A Toyota Tacoma is seen during the New York International Auto Show, in Manhattan, New York City, U.S., April 5, 2023. REUTERS/Andrew Kelly/File Photo

"Employees are frequently changing jobs in search of higher salaries. It has become difficult to secure personnel, and we can no longer maintain the required production volume," said one of the sources, who works at a supplier.

Toyota sold more than 230,000 of the Tacoma in the United States last year, representing about 10% of its total sales in that market. Only the RAV4 and Camry were bigger sellers.

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