Japanese car giant Honda will power down its UK factory in Swindon for four whole months when shifts end today, in response to a global slump in demand for its vehicles. The enforced shut-down – one of the longest in British manufacturing history – will see 3,000 workers sent packing for four months, two on full pay and two on 60% pay. The hope is that by June, people will be buying again – but the likelihood is that even then it’ll be making about half as many cars. And Honda’s not the only Japanese company feeling the squeeze...
Now you might think that being paid to take four months off work (including eight weeks on full pay) sounds like a rather attractive proposition. However, it’s a different story when – as in the case of these Honda workers – you’re not entirely sure that you’ll have a job to go back to. That’s why more than 1,000 have already chosen to take the option of an ‘assisted leaving scheme’ (otherwise known as voluntary redundancy, except that the ‘r’ word famously doesn’t exist in Honda’s vocabulary).
Honda’s slashing global production after seeing net profits slump by nearly 90% in the third quarter. Of course, it’s not the only carmaker having trouble (hence Lord Mandelson’s bailout – sorry, support package – earlier this week). But the situation in its home country isn’t helping: the Japanese economy is in a bad way, with exporters suffering from the rise of the yen. After gloomy news from Sony and Nintendo earlier this week, Toshiba and NEC posted quarterly losses yesterday, and today Hitachi announced 7,000 job cuts as it forecast an $8bn annual loss.
And the economic data from Japan is looking pretty scary: unemployment fell at its fastest rate in 44 years in December, with nearly 400,000 people losing their jobs as the jobless rate climbed to 4.4%. Industrial output fell by nearly 10%, and even domestic consumption is flagging – retail sales were down 2.7%. It all adds up to Japan’s worst month since 1974 – and given that it spent pretty much the whole of the 1990s in recession, that’s saying something. And you thought we had it bad.
Oh, but wait – we have. According to the IMF, the UK economy will shrink by 2.8% this year, more than the 2.6% expected in Japan. Which suggests that if things are looking grim for Japan now, they’re going to look just as bad if not worse in the UK before too long. How about that for a nice cheery thought to take you into the weekend?
This month's MT includes an in-depth feature on the parallels between Japan in the 1990s and our current economic woes. Online readers can catch a sneak preview here.
In today's bulletin:
Refinery strikes spread after foreign worker row
Honda shuts Swindon as Japan's woes get scary for UK
Davos Day Two: More talk, more action
Ford goes into a bigger spin
Solving big problems, with YouTube