The Toyota Engineering and Manufacturing Operations

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Table of Contents

Introduction
Theoretical framework
Discussion
The Corporation
Labour
The Community
The Environment
Conclusion
References

Introduction

The definition of globalization stems from capitalism. It is the domination of the world markets by multinational organisations with massive capital bases through the imposition of free trade policies leading to existence in massive frontiers simultaneously. The practice has been ongoing for quite some time but has however picked momentum in the last half decade.

Multiple Free Trade Agreements (FTAs) have been signed between nations in a bid to opening up new markets for the maximization of profits for capitalists. The labour markets have not been left untouched, far from it, they are the drivers of globalizations as cheap labour usually amounts to less costs and in turn more revenue, a capitalist’s dream. Like in all other factors affecting the world economy, there have been beneficiaries of this practice as well as losers (Gereffi 2005).

Naturally, the beneficiaries are the few privileged members of the society whereas the losers have largely involved the marginalized poor, lowly paid workers ad the environment. Present trends, like melting of the ice caps due to global warming, tend to suggest that unless this practice is regulated, then our very existence is at risk. The regulation of globalization has been regarded as the most challenging task of the political leadership of our time.

The Toyota Engineering and Manufacturing, North America (TEMA), company provides a very good platform for the analysis of the operations of globalization. The company is a subsidiary of the Toyota Motor Company (TMC) of Japan and is based in Texas in the United States.

The case of Toyota is perfect since it is a blueprint of a multinational company which has 13 plants in North America alone. This helps in dispelling the notion that globalization only happens in developing countries. Toyota has already surpassed general motors in the production of automobiles in the US making it a very good example of a global company at work.

The company is accused of being the biggest force in undermining its workers and also the community it exists in. for starters, the 2,000 acre piece of land that the plant sits on was formerly ranch land. Additionally, the company has collaborated with the state in the preference of capital over labour.

This has an effect on the way workers are treated, how the community is handled and how the environment is utilized. The location of the plant and all others is along the NAFTA corridor that allows access to the markets in the south as far as Mexico and also on all other directions (Vogel 2006). No study can be conclusive without the examination of the significance the location plays.

Theoretical framework

Globalization as discussed is a product of communism and is driven by the need for rapid expansion into new markets and also in existing ones. Therefore, there are several characteristics of globalization that can be derived from this description. The first is that globalization is relentless in the search for cheap labour.

Hence, companies are opening up subsidiaries in areas where production is cheapest and then exporting these products into the markets that have opened up as a result of the free trade agreements. As a result, there are opportunities of employment that open up in those countries where multinational set up their production plants. The downside to this characteristic of globalization is that sometimes in a bid for utilizing cheap labour, children are coerced into working in these plants like in Asia.

When multinationals set up production plants in foreign countries, they are in effect investing in the resources of those countries which lead to foreign direct investment (FDI). This is because most factors of production readily available in those countries are utilized and only those that are not available are imported into the country. Globalization is therefore a source of development for different regions in the world.

The other characteristic of globalization is that it leads to increased sales in foreign countries that may amount to new markets that open up. Companies make more revenue from the marketing of products in countries that they have set up in by selling those products in those markets before they are exported into others.

Manufacturing in foreign countries means that there are a lot of raw materials that may be needed that translate to the importation of most factors of production not present in the countries of manufacture (Humphrey and Memedovic 2003).

As discussed above, many companies are usually attracted by the prospect of having cheap labour which accounts for a very small fraction of the total cost as it would have had where labour is more expensive. The exchange of factors of production has led to the improvement of communication as coordination is very important.

The negative impacts of globalization are usually concerned with the attitude of the multinationals towards their workers, some who are children, and the environment. Many multinationals corporations that set up in developing countries usually do not have employee structures and pay very little attention to them.

In addition, very little investment is made in the conservation of the environment with no established waste management systems. This has led to pollution on a very large scale. Another negative impact of globalization is that most multinationals do not develop the area in which they operate.

Discussion

The theoretical framework above presents a preview of what is expected in the subsequent discussion. Since the focus was on the Toyota Company, the discussion will look at the impact of globalization on the corporation itself, the labour market, the community of operation and the environment.

The Corporation

The company boasts a strategy that it refers to as lean manufacturing (Berger & MIT IPC 2005). This entails the manufacture of the “maximum number of sellable parts or services at the lowest operational cost” (Vogel 2010). This strategy has worked very well for the company as it is hinged on teamwork, flexibility and evaluations and re-evaluations. The system is aimed at maximizing “throughput” instead of “input” which is a system through which the company generates revenues form the sale of automobiles.

There is a lot of corporate rhetoric that is anti-lean manufacturing. The company has had partnerships with state governments that extends to it subsidies and tax abatements. There is also the factor that allows the company to maximize cheap labour both offshore and onshore to extensively produce low cost motor vehicles capable of competing with other companies in the country (Gereffi 2006).

On close inspection of the company’s operations, it is clear that no manufacturing process adopted saves on operational costs as the tax abatements and cheap labour do. This serves to uphold the principles and strategies that have been adopted by Toyota.

By the endorsement of the system, the company has made mega profits during its cause of operations and has remained relatively unaffected by the global economic dynamics. The successes of the company must however be measured against its impacts on its workforce, the community and the environment.

Labour

It is undoubted that the success of globalization has largely been at the expense of the working population. The strategy of utilizing cheap labour is affecting the labour market on two major fronts. The first effect is that globalization creates a sense of competition between the workers which drives the cost of labour further down (Herrigel 2004). Secondly, the effect has been that workers in regional labour markets have been stratified thus. The chart below shows the cost of labour in the Americas where Toyota operates.

North American auto industry production wages in US dollars 2007.

The North American Free Trade Agreement (NAFTA) is the reason why manufacturing companies in the US are moving their operations southerly in order to maximize the cheap labour in Mexico. The simple strategy is to pit workers against each other which works very well for the company but has had disastrous consequences for the labourers.

Among the consequences is the obsoleteness of UAW (United Auto Workers) which was one of the strongest welfare unions in the US, the deteriorating welfare of all auto workers, the continuous decline in the payable wages and other benefits and the decline in employment opportunities in both the Midwest and Canada (Sturgeon & Richard 2000).

The table shows how the wages are distributed in the various divisions of the Americas. Clearly, there is a distinction between the different wages with those in the Midwestern US assembly receiving the highest wages at $26 per hour. In sharp contrast, those in the Mexican parts receive and abysmal $1.75 per hour while performing relatively same tasks as their counterparts. Another disparity that is noticeable is that part workers receive about half what the others in the assembly do.

What is even more appalling is that assembly workers in Mexican parts receive only 16% as much as part workers in Midwestern US. The absence of part workers in southern US is largely because the company relies on Mexicans to produce he bulk of their parts and just crosses them over the border where they are utilized. This proximity was largely the reason why manufacturing plants were in the southern parts of the US.

Another strategy that has worked very well for the company has been the payment of surwages, a practice that involves the payment of wages that are higher than the minimum wages but much lower that those that are arrived at through collective bargaining. This makes it hard for members of these labour blocks to unionize and hence the company keeps control of the labour block. The figure below supports this fact.

It is clear that the company pays a little higher that the minimum age in San Antonio which is $11.55 and hour. The company adds an extra $3.70 dollars but that does not even begin to cover the amount that is demanded by the unions. The company has reiterated that this strategy is very important for its continued growth in North America.

The Community

It is almost absolute that the fate of the economy of a part like San Antonio is closely tied with that of its workers. In the discussions above, it is clear that the beneficiaries of globalization are usually a few people at the expense of the larger society. The economy of the area can thus be said not to be gaining as a result of having the company located here. As an example, we are going to examine public education in the area.

As a starting point, the deal between the government and the company where it receives subsidies and tax abatements mean that there is lost revenue for the region. The funds that were diverted into this cause could have been utilized in the development of public utilities or invested into the education system.

Even before the company was officially began and asked for applications from prospective workers, there was already an influx of people into the area seeking to be employed which put a pressure on the existing systems. This led to a financial crisis barely a year after the plant had been opened.

In 2007, Toyota’s tax was estimated at $700 million. The Southwest Independent School District (SWISD) went before the Bexar County Appraisal District (BAD) to challenge this valuation as it felt that revenue was being lost. As a retaliatory approach, the company’s lawyer also went before BAD arguing that the $700 valuation was too high for the $1.2 billion rated plant and that the figure should be reduced to $300 million.

The company went as far as to threaten BAD which led to it revising their tax downwards to $627 million. During the same period, the company installed a sewerage system in Texas which led it to receiving a further $52 million tax break which brought the total tax to $575 million. This scenario shows the power that multinationals has which is capable of holding local authorities at ransom and twisting them to do according to their will.

In that year, SWISD received taxes totalling to $2.86 million from Toyota but the figure included $2 million which was part of an initial deal, meaning that in subsequent years, the educational system in San Antonio will receive only meagre amounts from the company. This scenario is played out in all other social infrastructure.

The Environment

Toyota has been named as being environmentally responsible in Texas. However, on close inspection, they have relocated all their dirty manufacturing procedures outside the US to countries that have fewer restrictions to environmental pollution. For example, auto batteries are manufactured in Mexico and steel products are manufactured in the Far East countries where the governments are lax in enforcing environmental laws. Toyota thus gets tax breaks for not polluting the US but doing it elsewhere.

Conclusion

The discussion above has drawn comparisons on how globalization affects the economy of the world through the utilization of cheap labour and the destruction of the environment. The deliberate effort by Toyota to underpay its workers and in turn rob them of their rightful dues is a pattern does not go unnoticed by the government but is in fact assisted by it to succeed.

The payment of surwages further aims to subvert the need for unionization which is a well calculated move but is however against the rules of labour. The consequence of this cheap labour and by extension globalization is a poorer society which cannot adequately fend for itself leading to poverty.

The policies that are adopted by the Toyota Company have been emulated by other multinationals leading to the same results. This means that the workers are continually being exploited for the profit of a few individuals while their governments continue to do nothing.

It is not that multinationals should not make profits; on the contrary, they should make their profits in the edicts of ethics. Paying their workers the appropriate dues does not only help that single individual but also ensures that the economy of the particular country also benefits.

While there are positives that can be associated with globalization, the bottom line is that it is a trend that threatens the everyday survival of most populations. These positives are clearly outnumbered and their effects are nowhere as catastrophic as the negatives. It is therefore my recommendation that world governments revise the operations of multinationals in order to protest their societies and the environment.

References

Berger, S., & MIT IPC. 2005. How We Compete. Doubleday, New York.

Gereffi, G. 2005. The global economy: organization, governance and development, in Smelser, N. and Swedberg, R. (Eds): Handbook of Economic Sociology.

Gereffi, G. 2006. The New Off shoring of Jobs and Global Development. International Institute for Labor Studies, Geneva.

Herrigel, G. 2004. Emerging strategies and forms of governance in high-wage component manufacturing regions. Industry and Innovation Vol. 11, Nos. 1/2, pp.45-79.

Humphrey, J., & Memedovic O. 2003. The global automotive industry value chain: what prospects for upgrading by developing countries? Sectoral studies series, United Nations Industrial Development Organization, Vienna.

Sturgeon, T. & Richard, F. 2000. Globalization and Jobs in the Automotive Industry. Final Report to the Alfred P. Sloan Foundation, International Motor Vehicle Program, Center for Technology, Policy, and Industrial Development, Massachusetts Institute of Technology. Cambridge, MA.

Vogel, R.D. 2010. How Globalization Works Toyota Motor Manufacturing, Texas (TMMTX). Global Empire. Web.

Vogel, R.D. 2006. The NAFTA Corridors: Off shoring U.S. Transportation Jobs to Mexico. Monthly Review. Web.

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