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Toyota overhauls pay structure to secure IT talent

Automakers face cutthroat competition for workers in cutting-edge tech

Toyota Motor unveiled the e-Palette concept, a fully automated vehicle that can be used for anything from ride-sharing to a shop on wheels, at the 2018 CES consumer electronics show. (Photo courtesy of Toyota Motor)

NAGOYA, Japan -- Toyota Motor is revisiting its compensation to secure needed personnel as the industry shifts away from selling as many autos as possible and toward developing the vehicles of the future.

Information technology specialists are in especially high demand, among both fellow automakers and tech companies looking to break in. Even Toyota, considered one of the most desirable employers in Japan, is now being forced to make changes to keep workers from getting poached.

"Considering the impact of CASE" -- connected, autonomous, shared and electric vehicles -- "we face a big risk in terms of future operating profit," said Masayoshi Shirayanagi, a Toyota operating officer, at a December meeting with union leadership. The automaker invests more than 100 billion yen ($900 million) a year in connected and automated vehicles but does not expect to monetize the technology for at least a few years.

To unlock the potential in mobility technology, industry players should invest $45 billion in autonomous-vehicle technology and $1.8 trillion in financing self-driving taxis through 2035, according to Boston Consulting Group. Tech-sector giants like Google are already ahead of automakers in the field.

Toyota is spending 1.08 trillion yen on research and development for the fiscal year ending March 31, about 20% more than five years ago. Roughly 35% is for CASE technology, and staffers dedicated to the field have increased 10% groupwide in five years.

But even as Toyota places more weight on new automotive technologies, other companies are doing the same. The automaker feels that it can no longer compete for talent under a traditional Japanese-style compensation structure, where every employee gets the same increase in base pay.

"More IT specialists in their 20s and 30s are leaving Toyota to work somewhere else," a company employee said.

Toyota already pays workers recruited from outside more under a different compensation schedule. An even bigger change may be coming as the automaker and its leading labor union keep mum on whether they are discussing higher base pay in the annual wage negotiations that kicked off Wednesday.

Such blanket raises impose a significant financial burden without enabling the company to focus resources on personnel it really wants to keep.

"The auto industry is facing monumental changes as well as a labor shortage," said Takeshi Yamaguchi of the Toyota union, acknowledging management's challenges. "There's a big debate on what the company should invest in out of its limited resources."

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