Toyota Says China Labor Cost Hike 'Inevitable'

'If we change our suppliers, it would not provide a fundamental solution. What's important is how well we communicate with employees,' the company said.

Although the rapid rise of labor costs in China is "inevitable"Toyota has no immediate plan to review its supply chain in the country, its vice president said on July 27.

Foreign-run factories in China have been targeted in recent labor unrest as workers gamble on overseas companies responding to their demands and government officials supporting their actions.

Production at Toyota's assembly plant in southern China had to be suspended last month after a strike at an affiliated auto parts supplier in the country.

The unrest has sparked fears that the days of cheap Chinese labor could soon be over for foreign investors forced to offer pay rises to placate workers -- and for consumers accustomed to inexpensive goods.

However, Toyota vice president Atsushi Niimi said that he saw current events as a natural stage in China's economic evolution. "Japan had a period when (the government) sought to double incomes in the 1960s. At that time, strikes occurred frequently in Japan," he said.

"It's better for us to seek solutions by dialogue with employees, but before we are able to do this strikes occur. In a sense, it's inevitable.

"If we change our suppliers, it would not provide a fundamental solution. What's important is how well we communicate with employees."

On the prospect of Toyota's growth this financial year onward, Niimi said building more production capacity in emerging markets was key.

Despite the yen's current strength, the company said it was not considering importing vehicles to Japan from its lower-cost plants overseas but would instead focus on making domestic plants more cost-effective.

"I believe there are still many things we can do to innovate ways of manufacturing in Japan," he said.

"As Toyota is based in Japan,... we think it's important to keep our competitiveness in manufacturing in Japan," he said.

Copyright Agence France-Presse, 2010

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