20% Bonus Cut for Toyota Managers

Japanese workers at major companies such as Toyota get twice-a-year bonus pay in addition to their monthly salaries, a bonus which reflects the company’s performance. According to the AP, Toyota is cutting bonuses for managers as it faces a massive recall in the United States and huge losses for the second straight fiscal year. Yesterday, Toyota said winter bonus payments for 8,700 managers (!) in Japan will be cut by 20 percent.

The carmaker recently issued a recall affecting 4 million vehicles in the US to replace the gas pedals that can get stuck in the floor mats and cause sudden acceleration. Moreover, Toyota’s is also trying to reverse losses caused by a global slump and strengthening yen.

Toyota’s top executives and board have already given up their bonus pay. The cuts for managers follow a 60 percent year-on-year decline for their summer bonus this year, and a 10 percent cut for their winter bonus in 2008.

The bonuses for union workers have also been cut. Their winter bonus will average 930,000 yen this year, down 18 percent from the previous year, according to Toyota.

The cost of the US recall is expected to be significant because of the sheer number of vehicles. The carmaker recently revealed details on how they plan to fix the problem. Aside from reshaping the accelerator pedal, Toyota will replace all the floor mats.

The Nikkei, Japan’s biggest business newspaper, said the recall costs, although reaching tens of billions of yen, won’t change Toyota’s annual earnings forecast because the company has money set aside for such situations.

Nevertheless, Toyota declined comment on the either the costs or the forecasts.