Toyota's Mexican Production Stalled by Labor Shortages, Highlighting Supply Chain Bottleneck

Toyota's Mexican Production Stalled by Labor Shortages, Highlighting Supply Chain Bottleneck

Toyota's Mexican Production Halted by Labor Shortages

Toyota Motor Corp. faced repeated production stoppages at its Mexican plant in February and March due to labor shortages at its suppliers. This disruption highlights a potential bottleneck for the world's leading automaker, which aims to produce 10 million vehicles this year.

The stoppages, confirmed by documents reviewed by Reuters, resulted in a total of 19 days of halted production at Toyota's Tijuana plant, where the Tacoma pick-up truck is manufactured. Technical issues at the plant also contributed to the stoppage.

Toyota is collaborating with some suppliers to alleviate the strain. However, some parts makers are struggling to maintain production due to the worker shortage. This situation adds to the challenges faced by the Japanese manufacturing giant, which is already grappling with the fallout from a safety test certification scandal at its subsidiary Daihatsu and governance issues at two other group companies.

These issues have prompted Toyota to delay the start of electric vehicle production in the United States by six months, to around June 2026. The supply chain disruptions also explain some of Toyota's recent difficulties in the United States, despite increased demand for vehicles, particularly hybrids.

The labor shortages are a result of robust economic growth and rising wages in North America, leading to higher employee turnover as workers seek better conditions. This situation has made it difficult for suppliers to maintain the required production volume.

Toyota's North American operations suffered a 27.5 billion yen ($176 million) operating loss in the first quarter of 2023. However, the company delivered record earnings overall and has forecast a 20% profit decline in the current financial year, citing investments in both suppliers and strategy.