Auto Industry Woes Widespread : Cutbacks: Tough competition means hard choices for many manufacturers.
Mazda Motor of America, which is eliminating a quarter of the remaining jobs at its Irvine headquarters, isn’t the only auto maker resorting to layoffs to counter stalled sales.
Automobile manufacturers around the world are “gearing up for competition in the international marketplace,” said James M. Bills, an economist with Comerica Bank in Detroit. “It’s a difficult adjustment, not only in this country, but in Japan and Europe as well.”
Mazda’s U.S. sales arm is eliminating 175 jobs nationwide and shrinking its Irvine headquarters staff to about 400 from 540. The layoffs announced Tuesday are in addition to the 200 corporate staff members let go during a restructuring that ended early this year.
Just hours before the Mazda announcement, Mercedes-Benz AG said it would cut 14,000 jobs from its worldwide work force during 1994, twice as many jobs as the German auto maker plans to eliminate this year. And, Nissan Motor Co. said it is reconsidering plans to expand a manufacturing plant in the United Kingdom that opened in 1984.
The auto industry’s new competitive environment has had an impact on Southern California, home to the U.S. sales operations for several foreign car makers.
* In July, Fountain Valley-based Hyundai Motor America let go 30 employees at its headquarters. As with Mazda, the Korean auto makers said its layoffs were driven by a restructuring designed to make the company more competitive.
* In April, Nissan Motor Corp.’s Carson-based U.S. sales organization furloughed 115 corporate employees when it merged several corporate departments and moved other corporate functions into regional offices.
* Last year, Daihatsu stopped exporting passenger vehicles to the U.S. market. Daihatsu America Inc. in Los Alamitos, the auto company’s U.S. sales subsidiary, remains in business, serving existing customers. However, corporate employment in the United States shriveled to about 45 from 145 in 1992.
But the two leading Japanese auto makers have so far escaped layoffs.
Toyota Motor Sales U.S.A. Inc. in Torrance has not had to lay off employees because its sales continue to increase, a spokeswoman said Tuesday. Honda of America Manufacturing Inc. handled a recent sales slowdown by cutting back production at its Marysville, Ohio, plant and sending employees to quality-control classes.
(On Tuesday, Honda’s parent company in Tokyo said its April-June earnings plunged 62% from the same period last year to 6.09 billion yen, the equivalent of $58.6 million. And Matsushita Electric Industrial Co., parent of entertainment giant MCA and maker of the Panasonic and Technics brands, said its quarterly profits sagged 23% to 6.7 billion yen, or $64.4 million.)
But Mazda’s weak financial health worldwide made the U.S. layoffs unavoidable, observers said.
Mazda’s key markets--Japan, Europe and the United States--”went down at the very time they needed strong markets,” said George Peterson, president of AutoPacific Group, a Santa Ana-based consulting firm. “They needed a booming market and they ended up with an anemic market.”
Peterson characterized the corporate layoffs as a “hiccup” for Mazda, which still has a strong product lineup featuring some of the auto world’s best-designed models.
“They were trying to make the bold move into the top tier (with market leaders Honda and Toyota) but they haven’t been able to advertise strongly enough,” Peterson said. “It’s a chicken-and-egg sort of thing. They can’t advertise the new cars strongly enough, but the new cars don’t sell unless they advertise.”
Throw in the hard-charging yen, which is trading at historic lows compared to the U.S. dollar, and “Japanese cars aren’t as appealing, price-wise,” Bills said. “They’re really hurting now and I suspect that (profitability concerns) would provoke some policy changes over in Japan.”
“Former Chrysler Chairman Lee Iacocca once said: ‘Give me a 180 yen-to-the-dollar ratio and I’ll show you how to compete,’ ” said C.R. (Dick) Brown, Daihatsu America’s chief operating officer. “Well, here we are with the yen at 100 or 105, which makes it more difficult.”
That historically low yen-to-dollar ratio “is a rather simple indicator of the dramatic impact that monetary exchange rates have on the ability to compete,” Brown said. “Every incremental increase in price . . . means the potential for less (sales) volume. And with less volume there’s a lower requirement for people. It’s as simple as that.”
While many Japanese companies are struggling because of the currency exchange rate, “the beneficiary certainly has been the U.S. auto makers,” Bills said. “And they’re going to continue to benefit.”
