They also can avoid the large cash incentives that are required to clear large inventories. GM, Ford and Chrysler, by contrast, typically try to maximize output during a strong economy such as the nation enjoyed during the late 1990s. To produce aggressively, they employ prodigiously. But obtaining high prices for their products is difficult because the market literally is flooded with vehicles. And when demand slips, workers are redundant.
Incentive payments rise, cutting into profits.
To do this, it operated three final assembly plants and employed about 16,500 workers. Toyota built 1.1 million vehicles in North America at four assembly plants, employing about 21,000 workers, hourly and salaried. GM, by contrast, built 5.6 million vehicles in North America last year. It did so at 29 assembly plants, employing about 170,000 hourly workers. In other words, GM built 5.6 times as many cars and trucks in North America as Honda, but it needed about 10 times the number of assembly plants and 10 times the workers to accomplish this feat.