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Tuesday, May 29, 2012

Toyota To Keep Car Production In Japan To Aid Recovery

Well... there's good news and there's bad news with that headline.

The good news is that Toyoda Akio (surname first), the president of the Toyota Motor Corp. and the new head of the head of the Japan Automobile Manufacturers Association (JAMA) has promised to keep his company's car production in Japan - rather than out-sourcing to cheaper countries - in an effort to create jobs and to spur the hurting Japanese economy and to aid in the recovery after the March 11, 2011 twin disasters and subsequent near nuclear meltdowns. 

Bravo.

The bad news is that this will cost jobs in other countries.  Especially bad if you happen to work in the auto industry in one of those other countries.

“In these tough times, we must take up the challenge of bringing revival back to Japan and of bringing back smiles to Japan,” Toyoda says.

He continues,  noting that production, technological innovation and suppliers must be kept in Japan, but that Japan's consumption tax hike threatens to “hollow out’” the auto manufacturing sector which, including suppliers, dealers and autoworkers, employs over 5-million people in Japan.

Toyoda says that Japan's plan to increase the country's sales tax is a “moral hazard,” and urged, nay pleaded, that the currently high taxation on car ownership to be reformed first.

Japan car taxation system, is, to be polite, a bitch and is guessed to be 2x or 3x of Germany and the U.K. It's also 49x what it is in the U.S.

“Companies that are working hard should be rewarded,” states Toyoda acknowledging that Nissan, Honda and Toyota are all doing well after the Japan's disasters and the Thailand flood in 2011 that all disrupted production not only of cars, but of replacement parts for cars.

Despite the revival in fortunes for the Japan Big 3, it's not coming from Japan, rather it is coming from Brazil, India and China.

Japan's auto sector, it seems, has been in a funk for years, as it appears that young people have lost the itch to drive. You can probably blame rising costs in gas as a possible reason. JAMA notes that auto sales in Japan totaled 4.2 million in 2011 - which was down 15 per cent from 2010.

But, thanks to China, Brazil and India, vehicle demand is expected to grow by 19 per cent to a total of 5-million vehicles for 2012. This is backed up by vehicle production doubling for the month of March 2012 from March 2011 to 980,000!

Despite the optimism, Toyoda and the rest of JAMA fears it will all go to hell should government subsidies be cut.

Files compiled by Andrew Joseph

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