Toyota proves that as mining booms, manufacturers suffer: Kohler

Toyota’s vision, according to its corporate website, is to be a: “Most respected and admired company”.

It doesn’t say by whom, but let’s assume it’s not simply head office. As a maker of consumer products with a huge marketing budget, Toyota has always taken its reputation very seriously, so it would have been a big and difficult decision to volunteer to be this month’s least admired and least respected company.

What it did was score workers on a checklist of behaviours and skills, tell the 350 with lowest scores to pack their lockers and get on buses that would take them to a reception centre where they were given their redundancy papers. It’s hard to imagine a worse way to be sacked.

Most companies that want to be respected and admired call for voluntary redundancies or they “performance manage” people out of the business quietly with one-on-one meetings. What we saw from Toyota this week was a direct consequence of the mining boom and the high Australian currency.

Businesses under the intense pressure of cheap imports can no longer afford to simply take voluntary redundancies, where the best people go first because they are the most likely to get another job and the most likely to get the biggest payouts.

The way Toyota did it this week was pretty rough, let’s face it. Most companies that are letting people go for performance reasons try to let them preserve both dignity and job prospects, unless it’s a sacking for cause.

I suspect in this case Toyota got into a bind because the numbers were large and because it was negotiating with the union, the Australian Manufacturing Workers Union, and had been since January when Toyota’s local chief, Max Yasuda, announced there would have to be redundancies. The company’s EBA mandated negotiations with the union over redundancies.

On February 20 an employee bulletin said the company and the union had reached agreement on the selection criteria, however on April 11 they were before Fair Work Australia arguing about whether the redundancies would be forced or voluntary.

What happened then is a little mysterious. It is suggested that a deal was done before FWA commissioner Michael Gay, in which the union accepted the criteria while arguing that they be applied to voluntary redundancy applications.

In any event the company decided to stick with tapping the workers publicly and putting them in buses, so any deal was off and the AMWU was off to the lawyers to see whether there was a case for unfair dismissal or targeting of union shop stewards, which is illegal. That remains an open question, but we can assume Toyota got good advice and was careful.

Obviously the company’s bosses decided that doing 350 one-on-one meetings in secret was impossible, so they might as well take the PR pain of a big hit.

What we are seeing with this and a recent spate of lockouts is a new movement of militant employees, a repeat of the 1980s and 1990s when the lowering of tariffs forced firms to take a harder line with unions, followed by the Howard Government legislation that paved the way to roll back union control.

In 2006 John Howard tried to take his legislation a step further by allowing ‘hard won’ conditions to be negotiated away through WorkChoices.

In 2007 the electorate rejected that idea and installed a Labor Government, but the trouble is that its new legislation reasserted the unions’ franchise at the same time as a mining boom lifted the terms of trade and the currency and tightened the pressure on companies from imports.

So now the ALP and the union movement is caught: you can’t have a mining boom plus compliant manufacturers.

And there’s little point, as the AWU’s Paul Howes did the other day, in shaking your fist at the sky and praying for the currency to fall. The new reality is here to stay.

If you want to know what it means, read Jackson Hewett’s interview with Simon Poole of Finisar Australia in Productivity Spectator. He has been cutting costs by 15% a year by getting the entire staff behind the project. It’s really a story about the future of manufacturing in this country.

This article first appeared on Business Spectator.