Graphic: British carmakers hit the brakes

A further 800 jobs in Britain’s car industry were put at risk yesterday after Toyota Motor, the greatest example of Japan’s postwar economic miracle, warned that it will go into the red for the first time since 1941.

The possible job losses – 15 per cent of Toyota’s UK workforce – would add to the 40,000 positions expected to be eliminated from the UK car industry’s 200,000 over the next three years, as sharply declining demand for its cars is likely to trigger redundancies across Toyota’s business.

Toyota, which analysts universally believe to be the most innovative and efficient of the leading car companies, makes the Auris, the Avensis and Corolla models at its plant in Burnaston, Derbyshire, and manufactures engines at its Deeside factory in North Wales, which employ 5,250 people.

Toyota, which decided recently to halve the number of shifts on its Auris production line and will close its Burnaston plant for four weeks over the next four months, follows a string of carmakers in announcing moves to cut costs.

Vauxhall’s owners are in talks with trade unions over pay cuts and a four-day week and has offered nine-month sabbaticals to thousands of workers at its Ellesmere Port factory in the North West of England.

Tata Group, owner of Jaguar Land Rover, is negotiating a government bailout worth tens of millions of pounds to enable it to pay suppliers, while Honda’s plant in Swindon will be mothballed for February and March. BMW’s Mini plant in Cowley, Oxford closed ten days ago for an extended break of a month and has shed 300 agency staff, while Ford’s Transit van factory in Southampton has closed for four weeks instead of the usual one.

Analysts in Tokyo predict that the cost savings at Toyota, which recently dethroned General Motors as the world’s largest carmaker, would send a shockwave throughout the extensive “food chain” of industries that keep Toyota’s industrial engines running across the world.

Katsuaki Watanabe, Toyota’s president, described the situation as “an emergency of a sort we’ve never experienced before”, adding that there was no way to see an immediate end to the crisis.

Professor Garel Rhys, of the Cardiff Business School and president of Cardiff University’s Centre for Automotive Research, said: “Every single car market in the world is down, signalling it’s a depression not a recession. This year is terrible, next year will be even worse. The last time the North American, Japanese and European car markets were all in recession at the same time was in 1945, which was hardly a normal year.”

Professor Rhys also predicts that the sale of vehicles in the UK, which stood at 2.4 million units last year, will fall to 2.1 million this year and to 1.6 million in 2009.

Kota Yuzawa, an analyst at Goldman Sachs, is now predicting global auto demand to fall between 15 and 20 per cent over the next few years, with potentially dramatic reviews of production systems by leading manufactuers.

Toyota has not made any of its permanent staff redundant yet but it has cut an unspecified number of temporary workers. The group promised to do all that it could to retain permanent British workers but could not rule out the possibility of redundancies.

A Toyota spokeswoman said: “The times are changing so fast that it’s difficult to predict what will happen even in the next two months.”

Toyota’s bleak admission is a double-punch to markets as they approach the last few trading sessions of the year, and the company’s full-year loss – unprecedented since the company stopped making looms and turned its hand to carmaking – is expected to reverberate throughout Japan.

“We have lived our whole lives knowing only a situation where Toyota makes money,” the senior executive of one Nagoya-based car dashboard maker told The Times. “This changes our whole world.”

Ray Kishor, a former consultant to the car industry and now an analyst, says the lesson from Toyota’s rapidly declining fortunes is that it leaves little hope for the rest of the industry. “Clearly nobody is immune to the collapse in consumer confidence and the weakening economy.”