Toyota Motor Corporation is a leading auto maker. However, as a corporate citizen, the company poor and, in our opinion, poses serious human rights risk to investors.
It is Japan’s #1 carmaker. The company makes a hybrid-powered (gas and electric) sedan — the Prius — that is popular in US and European markets. Its gas-powered cars, pickups, minivans, and SUVs include such models as Camry, Corolla, 4Runner, Land Cruiser, Sienna, the luxury Lexus line, the Scion brand, and a full-sized pickup truck, the V-8 Tundra. Toyota also makes forklifts and manufactured housing, and offers consumer financial services. Toyota has already passed Chrysler and Ford and is closing in on General Motors.
The company has an expressed plan of gaining a global 10% share of the automotive market by the early 2010s. To do this, Toyota feels it must build the cars where, or very near where, they will be bought. To this end Toyota opened new plants in the US, China, and Thailand in the last few years. Toyota also beefed up capacity at existing plants in France and Thailand to meet increasing demand. Future expansion plans include a plant in Russia, a new Canadian plant (complete in 2008), and a new plant in the US (Mississippi, scheduled to open in 2010).
Recent Developments
As noted in the Wall Street Journal on August 6, 2008, slumping U.S. sales of trucks and sports-utility vehicles contributed to a 28% drop in Toyota Motor Corp’s net profit for its fiscal first quarter to June 30, even as demand soared for its fuel-efficient models.The weak results are a rare setback for Toyota, whose rapid expansion in sales and profit growth this decade once appeared to be immune to hardships facing other auto makers. Still, its woes pale before the monumental challenges facing Detroit auto makers General Motors Corp. and Ford Motor Co., which both recorded billions of dollars in losses in the same, April-to-June, quarter.
In June 2008 the National Labor Committee (NLC) released a 65-page report, “The Toyota You Don’t Know,” documenting human rights violations by Toyota Motor Company. Highlights from the report include: Toyota linked to human trafficking and sweatshop abuse: Toyota’s supply chain is apparently riddled with sweatshop abuse, including the trafficking of foreign guest workers–mostly from China and Vietnam-to Japan, who are stripped of their passports and often forced to work. Prius made by low-wage temps: Fully one-third-10,000-of all Toyota assembly line workers in Japan are low-wage temps who earn less than 60 percent of what full time workers do, and even less when benefits are included. Ties to Burmese dictators: Toyota is involved in several joint business ventures with the ruthless military regime in Burma. Repression of freedom of association: Toyota was cited by the ILO as, “…a multinational company, apparently with little regard for corporate responsibility…” for its role in suppressing freedom of association at its plant in the Philippines, where Toyota fired 227 workers for daring to exercise their legal right to organize. Toyota and the race to the bottom: Toyota is imposing its low wage model at its non-union plants in the south of the United States, which will result in wages and benefits being slashed across the auto industry.
Labor & Human Rights Risk Factors
In November 2007, the Chicago Tribune reported that a Toyota Motor Sales U.S.A. executive knocked a video camera out of the hands of an environmental activist posing as another industry official Wednesday at the media preview for the Los Angeles Auto Show, the latest such public effort to pressure major automakers to alter their environmental policies The incident occurred at the end of Toyota’s press conference, where Bob Carter, vice president and general manager of the Toyota division, was asked by the man why Toyota was suing California over carbon-dioxide emissions regulations. Carter knocked the video camera from the man’s hands, and security guards separated the two. The unidentified activist, who said he was with the San Francisco-based Rainforest Action Network, was escorted away by police. Toyota executives said they did not plan to press charges. Toyota recently became a target of environmental groups.
An October 2007 article in Automotive News says that Toyota Motor Corporation is accused of racist practices. For years, black dealers have complained that Toyota and other import-brand automakers benefit from selling vehicles to minority customers, but provide inadequate training and financial aid to minority dealers.
An October 2007 report in Bulletin Wire states that Toyota has reassured its 4,000 Melbourne workers their jobs are safe, for now, amid fears rising market pressures will force its Australian plant to close. In the latest blow to Australia’s multibillion-dollar car industry, Toyota has warned it could head offshore if tariffs are relaxed on top of the thriving Australian dollar.
Country Risk
The company operates in Colombia, China, Haiti, Kuwait, Oman, Saudi Arabia, Guatemala, Bahrain, Brunei, Angola, Sudan, Zimbabwe, the United Arab Emirates and Vietnam, which are on the AFL-CIO Country Watch List. Countries on this list are either lacking labor legislation that recognizes fundamental worker rights or they have labor legislation, but it is not enforced.
Union & Employee Relations
Toyota workers are represented by the Vehicles Builders Union and Electrical Trades Union, the UAW, the Kanto Regional Council of the Japan All Shipbuilding and Engineering Union, Japan Auto-Workers’ Network (JAWN), APWSL, Confederation of Japan Automobile Workers’ Unions (JAW), ASAHI, Toyota Motor Philippines Corporation Workers Association, Amicus manufacturing union, and the Federation of All Toyota Workers’ Unions. Approximately 88% of Toyota’s regular employees in Japan are members of the Federation of All Toyota Workers’ Unions.
In January 2006, about 1,550 workers at a Toyota factory in India went on strike to protest the dismissal of three workers. The company then imposed a lockout, but later resumed partial production with non-unionized workers. Labor leaders allege that the workers were fired from the Bangalore plant for being active in the union, while management says they were fired for disciplinary reasons. The strike lasted two weeks.
Assessment
Toyota represents a clear example of a company’s corporate responsibility policies not matching its practice. In addition to the human rights violation noted in this report, Toyota has extensive operations in high risk countries, it has been accused of racist practices, and the company sued the state of California over carbon-dioxide emissions regulations.
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