GM and Toyota Planning to Cut Jobs in Thailand to Reduce Production Cost

Global economic slump is now well-documented across the world. In fact, the ongoing credit crunch has already affected many a sectors in several countries. Many people lost their jobs, many business organizations shut down and different business have been badly affected. Amidst world wide economic recession, two giants of automotive industry, General Motors and Toyota, are now planning to production in Thailand due to drop in demand.

IHT reported:

GM Thailand said that its factory at Rayong, which has a capacity of 130,000 units a year, would close for two months starting in mid-December and that it planned to cut 258 jobs there.

"We plan to close the plant to help control costs, and our 2,000 workers will be paid 75 percent of their monthly salary during the shutdown," Chartchai Suwanasevok, the director of public relations, said, without giving details on the production impact.

Besides General Motors, Toyota is also planning to cut production costs in Thailand. 340 of 1,850 temporary workers at Toyota’s Gateway plant in Thailand might be imposed early retirement. Toyota is leading the auto market in Thailand. However, Toyota saw 21 percent drop in sales in October, compared with the same period of last year. Political instability also played a role behind the sales drop.

Should Toyota go for more Inexpensive Models in the US Market?

The US market is the most attractive one for auto makers. It is the largest car market and at the same time, consumers here can afford to buy expensive models. However, things are not going that great in the last few months and the economy is suffering from recession. So, Toyota is going to decrease its production because the demand is falling.

Well, Toyota is not the only auto maker that is suffering at this moment. In fact, its main rival GM is suffering even more. GM is on the verge of bankruptcy. Only a generous support from US government can save the company. So, Toyota bosses should thank God that they are still managing quite well.

So, let us come back to the original question. I believe that Toyota should come with out a few models that wont be expensive. It will give the consumers more options within their budget.

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Toyota Holds Back its Pre-Scheduled Prius Launch in India

Toyota has recently held back its pre-scheduled launch of Prius in Indian auto market. Toyota Prius is a hybrid car and in fact, this is the world’s first hybrid car which went into mass production. According to reports, there are several things that led Toyota to take this decision. Issues concerning infrastructure and duty structure are some of the reasons behind it. Most importantly, the company could not yet come up with a competitive price for Prius in Indian market. Recently, Honda dropped the price of its Civic hybrid car by Rs 8.14 lak. This move by Honda also played a big role behind Toyota’s hold on the launch of Prius hybrid car. Both Toyota and Honda are the leading hybrid car manufacturers in the world.

Hybrid is a kind of car which runs both on petrol as well as on electric motor. Hybrid car is fuel-efficient and environment friendly and the demand for Hybrid car has been increasing steadily in the world with surging fuel prices. No doubt, Toyota will face strong competition from Honda in entering its Hybrid cars in Indian market. Now, let us see if Toyota can launch Prius in Indian market.

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Fitch Ratings Ltd.puts Toyota in "Rating Watch Negative"

Famous credit rating agency, Fitch Ratings Ltd.  put Toyota Motor Corporation (TYO:7203) on “Rating Watch Negative” from its previous “AAA” ratings. This drop is obviously the result in sales slump. Toyota Motor Corp. is facing such downgrades for the first time in last ten years. According to Fitch Ratings, Toyota will be kept under continuous review for the next several weeks. Another reputed Japanese automaker, Honda Motor Co., Ltd. (TYO:7267) also observed a downward rating from “positive” to “stable.” During the high priced fuel period, Honda’s small cars sold like hot cake in USA which kept its rating in “A+.”

America is Toyota Motor Corporation’s biggest market but the largest auto maker in the world shocked investors last month by cutting its annual forecast by 63%. Though Toyota Motor Corporation sells small cars and its hybrid model Toyota Prius is very popular, the company mainly focuses on producing large vehicles in USA which has been badly hit. Earlier this month, the company cut down its earning target from 1.25 trillion yen to 550 billion yen. The company has 317 billion yen in debt in 2008. The 15% rise of yen against the dollar and 32% gain against the euro also cut down Toyota’s profit share significantly. Bloomberg.com reports: 

The rating cut would be the company's first since Moody's Investors Service reduced its long-term debt rating from Aaa to Aa1 in 1998. Moody's raised the company back up to Aaa in 2003. Standard & Poor's has rated the carmaker AAA since 1985. Toyota spokesman Hideaki Homma declined to comment on the possible rating change.

Toyota fell 0.3 percent to 3,130 yen today in Tokyo. The stock has dropped 48 percent this year, set for the worst annual performance since at least 1975.

A “lower debt rating” is further going to jeopardize Toyota’s ability to offer “interest-free loans” for increasing its sales. The ongoing financial crisis pushed the overall car sales in USA to the lowest since 1983. Earlier this year, Toyota Motor was leading General Motors Corporation (NYSE:GM) in terms of global auto sales.

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