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Shift in equilibrium

From WSJ
TIANJIN, China—Toyota Motor Corp. suspended production at an assembly plant in China on Friday because of a strike at a supplier factory, as the impact of labor unrest escalates for the world’s largest auto maker in the biggest car market.

Hitoshi Yokoyama, a Beijing-based Toyota spokesman, said a shortage of certain plastic interior parts from the supplier plant, where workers have been striking since Thursday, began curtailing production at Toyota’s car plant in Tianjin Thursday night. By Friday afternoon, all three of its assembly lines had been idled.

Toyota doesn’t know how long the shutdown will last but is doing its best to resume work as soon as possible, Mr. Yokoyama said.

The Tianjin plant, which makes Corolla, Rav4 and other models and has capacity to produce 400,000 cars a year, is one of Toyota’s largest in China. It has assembly plants in three other Chinese cities—Changchun in the northeast, Chengdu in the southwest, and Guangzhou in the south.

The worker unrest at the Toyota supplier plant is part of a wave of labor action across China in recent weeks that also has hit Honda Motor Co. Honda resolved strikes at two supplier plants in the southern province of Guangdong that also temporarily halted production of vehicles.

At a third plant, Honda Lock (Guangdong) Co. in the Guangdong city of Zhongshan, striking workers agreed to return to their posts earlier this week pending a new compensation offer from management Friday. Workers have threatened to resume their strike if they don’t like the terms of that offer. As of late Friday afternoon, no agreement had been reached, representatives of both sides said.

Any prolonged disruption in Tianjin could sting Toyota in a market where it is lagging behind its rivals. Its sales in China last year grew 21% to 700,900 vehicles, even as China’s total sales surged about 50% to 13 million vehicles, vaulting it past the U.S. as the world’s largest market.

Toyota’s problems in Tianjin stem from a strike at Tianjin Toyoda Gosei Co., a joint venture part-owned by Japan’s Toyoda Gosei Co., which in turn is 42%-owned by Toyota. Tianjin Toyoda Gosei has two facilities located near each other that employ a total of 1,700 workers in an industrial park in this northeastern port city.

About 40 workers at one of the Tianjin Toyoda Gosei plants began striking early Thursday, with more joining later in the day. By Friday afternoon, that plant appeared to be empty, with no activity visible through an open door. Workers were present at the other facility, although they said that production there had been temporarily halted earlier Friday.

Workers said a large number of police showed up at the Tianjin Toyoda Gosei plant Thursday night, apparently to try to end the strike. Two workers said in interviews that police beat some striking workers and that several workers had to go to the hospital.

An officer with the Tianjin public-security department confirmed that policemen had been sent to Tianjin Toyoda Gosei Thursday to “keep order.” He declined to say whether any workers were hit or detained.

On Friday afternoon, only a handful of police could be seen near the factories.

One of the workers, who said he witnessed the police hitting colleagues, said he and his work mates are now demanding a significantly larger pay increase because they are angry about the police assault. “I came here to save money,” said the man, a 24-year-old from nearby Hebei province who declined to give his name out of fear of retaliation. But he said it isn’t easy from the “meager pay” he receives, which he put at about 1,000 yuan a month, or $146.

A number of workers at another Toyota supplier in Tianjin, Tianjin Star Light (Xingguang) Rubber Plastic Co., which is 51%-owned by Toyoda Gosei, walked off the job earlier in the week, demanding a pay hike. But those workers, who produce rubber weather strips, quickly agreed to return.

A Toyoda Gosei manager said Thursday that workers at Tianjin Toyoda Gosei began threatening to strike a week or so ago. The plant agreed to provide a 20% wage increase Tuesday, and the factory’s labor union formally accepted the offer the next day. But 40 workers in the plant’s logistics department, which handles parts deliveries to Toyota plants, began asking for a bigger pay hike and walked off the job Thursday morning.

A Chinese worker at Tianjin Toyoda Gosei said workers are frustrated despite the offered wage increase because they feel their requests to negotiate with the company were ignored for months. “Our Japanese bosses think we should not get a raise at all,” said the worker, who asked not to be named. “They look down on Chinese workers.” Workers generally make slightly more than 900 yuan a month, she said, though that doesn’t include overtime and some workers make more.
—Gao Sen and Kersten Zhang contributed to this article.

I recalled MM Lee had mentioned many years ago, we have to accept what is given until the China catch up in terms of wages. And here we see the cruelty of capitalism at work. Seems like companies nowadays are lacking ideas to beautify their balance sheet for shareholders other than maintaining strict level of cost-cutting measures, which of cos include depressing pay. This is especially true for engineers working in competitive market. This has happened to engineers in Singapore 10 years ago till now and nothing has been changed.

As for China, it looks exactly the same like Singapore. The China workers are working harder and harder and yet to see the thing they can spend on lesser and lesser due to inflation. You can see they are paid only 1000 yuan per month? In order to get out of this vicious cycle, it means they have to go for further education for better paying job, which most do not have the financial means to do so. But even so, I think there might be too many PHD, masters or degree holders trying hard looking for job in China.

Meanwhile, I don’t think the China government has a way to solve the problem of widening disparity of income. Even Singapore can’t solve it. On one hand, they need the blue-collared worker to continue to work to drive the economy, at the same time, they couldn’t force the company to increase their pay because the moment company finds that it is not cost-effective to do business here, they will shift their operations elsewhere. This will make the country less competitive and drive up the rate of unemployment and thereby worsening the problem.

What we need is innovation, where we can put people on better use elsewhere. Creating a new industry to create more jobs for the people. Innovation is also a double-edged sword. It also means people will get irrelevant quicker in this economy. More upgrading of skills on individual is needed and hence more effort and cost on individual is required.

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