Toyota Motor Corp (NYSE:TM) has faced significant production challenges at its Tijuana, Mexico plant, resulting in multiple stoppages in February and March due to local labor shortages affecting suppliers.
The world's largest automaker, which aims to produce 10 million vehicles this year, saw production halted for 19 days, according to a report from Reuters.
In addition to labor shortages, technical problems at the Tijuana plant, where the Tacoma pick-up truck is manufactured, also contributed to the delays.
The disruptions highlight a critical vulnerability for Toyota as it struggles to maintain smooth operations amid these challenges.
To address the issues, Toyota is collaborating with suppliers to mitigate the impact of labor shortages. However, some parts manufacturers are barely managing to sustain production.
The situation has compounded existing problems for the Japanese automaker, which is already dealing with a safety test scandal involving its subsidiary Daihatsu and governance issues at other group companies.
So, Daihatsu opted to compensate its 423 domestic suppliers in Japan due to the production halt.
These challenges have led Toyota to delay the launch of its electric vehicles in the U.S. by six months, now expected around June 2026.
Related Read: Honda Commits $65B To Electrification By 2030
A letter to its North American suppliers in April highlighted frequent production halts, attributing them to personnel, equipment, and material supply issues.
Toyota is seeking detailed feedback from parts makers on their challenges and the support they require.
It's unclear if these labor issues are also affecting suppliers of other Japanese automakers in the U.S. despite increased demand, particularly for hybrids.
Last week, Toyota reported a significant operating loss in North America for the January-March period, despite achieving record overall earnings.
The high turnover rates in North America, driven by robust economic growth and rising wages, have exacerbated the problem.
Workers frequently leave jobs in heavy industry for better opportunities, making it difficult for Toyota and its suppliers to maintain the required production volume.
The company sold over 230,000 Tacoma trucks in the U.S. last year, accounting for about 10% of its sales in that market.
Toyota stock has gained more than 51% in the last 12 months. Investors can gain exposure to the stock via Avantis International Large Cap Value ETF (NYSE:AVIV) and ActivePassive International Equity ETF (NYSE:APIE).
Price Action: TM shares are trading higher by 1.92% at $219.76 in premarket at the last check Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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