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Sunday, April 24, 2011
The March 11 earthquake in Japan might as well have occurred next door to the cluster of auto-assembly plants and suppliers northwest of Columbus.
In this landscape of small towns and cornfields, Honda is the largest employer, and Honda is hurting. Starting late last month, the company cut back to half-shifts because of an interruption of parts shipments from Japan.
For now, the Tokyo-based automaker is giving workers the option to get paid for full shifts by doing extra training or cleaning in the afternoons. Workers and community leaders wonder how long this can last before the crisis overseas begins to put a dent in paychecks here.
"They're being so generous, it's unreal," said Randy Jackson of Marysville, who retired from Honda two years ago. "How many companies would pay (auto workers) to push a broom?"
Honda leaders are proud that they have never had a layoff, and they don't expect to start now.
But most of the company's suppliers, the hundreds of companies that provide parts and services, do not have that luxury. Last week, Newman Technology in Mansfield laid off 130 of its 700 workers, citing the slowdown in orders for exhaust systems from Honda. Others will almost certainly follow.
"If Honda is making half of the cars they were, then the parts suppliers will make half the parts they were," said Peter T. Ward, a professor of management at Ohio State University and a consultant to auto companies. In other words, Honda will not stockpile locally made parts, so the cuts in production will be felt far and wide.
Honda employs about 13,400 people in Ohio, the company says, and auto-parts suppliers employ about 56,000 people serving various automakers, according to the Bureau of Labor Statistics.
When the earthquake occurred, Honda had enough parts to continue normal production in Ohio until March 30, when the partial shifts began. The company has said the half-days will continue through May 6 and likely longer.
"The past six weeks have been tremendously difficult, and frankly, a heart-rending time for Honda and everyone in our industry," said John Mendel, Honda's top sales executive in North America, speaking last week at the New York International Auto Show.
There is no precedent for this. Other supply interruptions, such as those due to labor unrest in U.S. ports, were finished well before North American plants ran out of supplies.
Other Japan-based automakers are sharing the pain. For example, Toyota has cut shifts at its U.S. plants and has said that work might be disrupted until November or December. U.S.-based automakers also have had to make adjustments because they use parts made in Japan.
Deep connections
When Jackson, the Honda retiree, heard about the earthquake, he thought of the people he met on his three trips to the country for work. On a 1995 trip to Kumamoto, he walked to the local fire station to see how Japanese fire departments compared to his volunteer fire department in Ohio.
He met the local fire captain and the two struck up a friendship, despite the fact that neither spoke the other's language. He ate dinners with the captain's family, and came to feel like part of the family. At the end of the monthlong trip, his newfound friends insisted on driving him to the airport.
"At the airport, we both stood there and bawled," he said. "We didn't want to leave each other. I couldn't believe his generosity."
Kumamoto, where Honda has a motorcycle factory, is in a part of the country not hit hard by the earthquake.
Many Honda employees have stories like this, about visits to Japan or experiences with Japanese workers who came to Ohio.
Roughly 70 Ohio employees were in Japan when the earthquake hit; none was injured. Because of these deep connections, and the implications for Honda in North America, the disaster is much more than just a news event.
Most Honda employees in Ohio work in a sprawling campus that straddles the Union-Logan county line, including two assembly plants, a research and development center and the North American headquarters. Up the road in Russells Point in Logan County, the company builds transmissions. Farther west, in Anna in Shelby County, is an engine plant.
Honda is one of the state's top 10 private employers and largest automaker.
Workers are down to half-shifts of manufacturing, but you wouldn't know it from looking at the employee parking lot. On a recent afternoon at the Marysville plant, the lot had thousands of cars. Most of the workers were inside doing optional tasks so that they could take home a full day's pay.
According to Jackson, most daytime workers are taking Friday afternoons off. Only a few are going home after production ends each day before lunch. Those who leave are unpaid unless they take vacation time.
He remembers what it was like during those days when staying at the plant meant taking training or cleaning.
"I always hated it because it got so darn boring," he said.
Workers paint, sweep or find other ways to fill the time. This is different from how it might go with U.S.-based automakers that are more likely to issue layoff notices than sacrifice short-term earnings.
The reluctance to consider layoffs "is unusual, but it is deeply ingrained in the way Honda does business," said Ward, the OSU professor.
But there will be negative ramifications for the company, and for other automakers with similar cultures, such as Toyota. "Honda stockholders are going to feel the pain a bit," he said. The company will try make up for short-term losses with long-term gains because of high worker retention and positive morale, he said.
"We are trying to use the down time to strengthen our team," said Caroline Ramsey, Honda's manager of government and community relations in Ohio.
She is looking ahead to a time when the parts supply is restored and the company is so busy with production that there won't be time for training or cleaning. She doesn't know when that might be, but she hopes it's soon.
Cautious waiting
In the cities near Honda plants, such as Marysville and Bellefontaine, almost everyone can point to a friend, neighbor or relative who works for Honda. Local governments and public schools are concerned about the lower level of production because of the potential drop in tax receipts.
Perhaps no community feels this as keenly as Marysville, which has the largest Honda presence and also has started design on two multimillion-dollar building projects for the municipal court and police and fire departments.
The city also is searching for a new administrator, and City Council President Nevin Taylor said that person will need to be ready for the possibility that city income-tax revenue will drop because of cuts at Honda.
"We are worried about the dollar here in the city, sure, but those worries are nothing compared to the people who are worried about the dollars at home," he said.
John Gore, the city's newly appointed mayor, wants to be ready for any setbacks, but he also wants citizens to remain calm. After all, Honda employees are still working close to full-time hours.
"It's almost like a wait and see," he said. "We know it could be an issue."
The larger concern is what might happen if the parts supply is disrupted for several more months. Honda officials say the situation is changing by the day, and they have not made public statements about long-term plans. Outside observers can do little more than speculate and wait.
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