TM Toyota Motor Corporation

Cost-saving steps at U.S. factories will last through end of month as car sales plunge

By Sean McLain in Tokyo and Ben Foldy in Detroit 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 8, 2020).

Two of Japan's largest car companies, Nissan Motor Co. and Honda Motor Co., are furloughing U.S. factory workers without pay, adding to unemployment in an industry that has seen sales plummet during the spread of the new coronavirus.

Nissan said on Tuesday it would place about 10,000 U.S. hourly workers employed at plants in Tennessee and Mississippi on furlough until late April, calling the move a temporary layoff.

Honda also this week notified staff it would furlough about 14,400 factory employees in the U.S. as it extends a production shutdown to May 1. The Honda furloughs start Monday.

Affected workers at both Honda and Nissan can apply for enhanced unemployment benefits from the government. Both companies said the workers will retain benefits such as health care.

Nissan workers stopped receiving paychecks on Sunday except for a handful deemed essential, a Nissan spokeswoman said. She declined to say how many of the workers would be rehired, although Nissan has said that rebuilding sales in the U.S. is a key part of its plan to reverse years of declining revenue and profit.

At Honda, the company will pay workers' wages for part of this week and allow them to use paid time off to cover the rest, a spokesman said.

The U.S. has had record jobless claims after many cities locked down to block the virus's spread.

Manufacturers, and particularly car makers, have been among the worst-hit. The auto industry shut down nearly all U.S. production in March, and combined General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV have laid off about 150,000 hourly employees.

While workers at the Detroit car makers may draw some protection from their union contracts, factory workers at most foreign car makers in the country aren't unionized. Japanese car makers typically are loath to lay off U.S. workers, and have used that as a justification for the lack of union representation at their plants in the country.

Toyota Motor Corp. hasn't furloughed any workers despite idling production last month, a company spokesman said. Production workers are receiving full pay through Friday and can use paid time off the following week, he said, noting that Toyota's North American plants are set to reopen April 20.

In March, U.S. car sales fell nearly 40% from a year earlier, according to MarkLines, a Japanese automotive-data firm. Nissan's sales fell 48%. Honda also reported a 48% decline in U.S. sales last month as shelter-in-place orders took effect in many states, causing business to drop off.

In February Nissan announced its first quarterly loss since 2009. It is working on a recovery plan, but those efforts have been clouded by the virus pandemic. As a result, Nissan is hoarding cash. Workers in Spain also have been laid off. Outside of China and some plants in Japan, all of Nissan's manufacturing facilities are closed.

As news of the U.S. furloughs broke, Nissan executives were briefing board members on the details of their response to the pandemic. One person familiar with the discussions said Nissan was looking at ways to obtain loans from governments in Japan, the U.S. and Europe as well as tapping banks.

Nissan management is also looking at pay cuts, said people familiar with those discussions. Chief Executive Makoto Uchida and his deputy, Ashwani Gupta, are expected to forgo performance-based pay, the people said.

Executives say Nissan isn't in immediate danger of running out of cash, and analysts have described the company's balance sheet as relatively healthy, assuming the shutdown doesn't stretch into summer or fall.

Nissan has assembly plants in Smyrna, Tenn., and Canton, Miss. Most of the furloughed workers are expected to return to work on April 27, according to the company. Workers at Nissan's engine plant in Decherd, Tenn., are expected to resume work on April 24.

Write to Sean McLain at sean.mclain@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

(END) Dow Jones Newswires

April 08, 2020 02:47 ET (06:47 GMT)

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