Toyota Backpedals on Burma
If the Prius left you with a warm and fuzzy feeling for Toyota, you’re not alone. Noting that Toyota “has been a leader in both developing and promoting hybrid power-trains, the new industry standard, and is well advanced in overall R&D programs for future vehicle types,” the corporate responsibility research firm Innovest chose the company as the sole automotive representative in its top 100 most sustainable global companies in August 2007. We’re in agreement that Toyota deserves accolades for implementing sustainable business strategies that have led to the successful launch of hybrid fuel technology. But – and you sensed this “but” coming, didn’t you? – sustainability reaches beyond environmental practices.
After pledging it would not operate in Burma in 2001, it turns out that Toyota is still involved there.
Last summer, Domini Social Investments uncovered evidence linking Toyota to an auto and truck manufacturer in Burma (also known as Myanmar since the 1988 suppression of the democracy movement by the current military regime led by generals Than Shwe and Ne Win). Toyota Motors is not assembling vehicles in Burma, but its parts supplier, Toyota Tsusho, does so through a joint venture with Suzuki Motor and the military government-controlled Myanmar Auto & Diesel Engine Industries (MADI). Suppliers, often called trading companies, are more important than ever in global auto assembly. The widely admired pillars of Japanese manufacturing, “intelligent automation” and “just in time management,” are dependent on close relationships with suppliers. It’s no surprise then that Toyota owns the largest chunk of Toyota Tsusho shares, with a 22 percent stake in this trading company responsible for sourcing parts, electronics and metals for auto assembly.
Toyota Tsusho profits from a joint venture that builds Japanese motorcycles, light trucks and cars. With Myanmar ranking among the 20 poorest countries in the world (most people live on less than $200 a year), these vehicles are destined for the elite and those connected to the military. The Burmese military enjoys close ties with and influence over auto manufacturing. In fact, the Burmese general behind the gruesome attack on the convoy carrying the nation’s democratically elected leader, Aung San Suu Kyi, was seen as an invited guest at a Suzuki Motor-sponsored party marking the opening of an auto plant.
Acting on behalf of clients who are shareholders in Toyota, Trillium Asset Management Corporation (“Trillium”), the General Board of Pension & Health Benefits of the United Methodist Church and Winslow Management Company sent a strong letter of concern to Toyota Chairman Fujio Cho before last September’s “saffron revolt” when monks and ordinary citizens peacefully demonstrated against the regime. We requested information about the company’s ties to the joint venture and its role in providing autos and vehicle parts to the repressive regime.
Toyota wrote a short letter in response stating “Toyota shares [our] concerns about the human rights situation in Myanmar and we are carefully monitoring its ongoing status…Toyota’s global Guiding Principles [are] to honor the language and spirit of the law of every nation…Toyota has no partnership or contractual relationship with the Burmese government.”
As we evaluated this unsatisfactory response, media reports poured in about the stunning and brutal suppression of dissent. Reports estimate between 31 and 200 people, including a Japanese journalist, were killed in the September crackdown, while hundreds more were dragged from their homes.
Trillium and Domini wrote back to management, this time conveying our message to Toyota through a different entry point. As chance would have it, in November, the Japan Society in New York City invited Toyota’s Chairman Cho and several senior executives to celebrate the Society’s 100th anniversary. Before Chairman Cho delivered a lecture on the importance of local interaction to global success, Domini’s Asia analyst Shin Furuya and I hand-delivered our letter to a colleague of the Chairman.
In our letter we reminded Chairman Cho that Toyota set a precedent among Japanese companies in 2001 by publicly announcing it could not operate in Burma as originally believed. The company was among dozens recognizing the economic and political risks of doing business with a backward regime short on transparency and long on committing gross human rights violations. Companies left “not only because the Burmese junta violates human rights, but also because the junta violates (its own!) investment laws.”1 At the time, Toyota heeded Aung San Suu Kyi’s statement that “investment merely strengthens dictatorship” as well as the International Labor Organization’s call in June 2000 for governments to cease any relations with Burma. Some corporations publicly denounced the business climate. The CEO of Reebok said outright in 2005, “It’s impossible to conduct business in Burma without supporting this regime.”
Toyota dismissed its ties to Toyota Tsusho in an earlier correspondence, so our second letter detailed the relationship between the two companies. While Toyota claims no contractual relationship with the Burmese government, financial documents filed with Japanese regulators indicate Toyota exercises significant influence over Toyota Tsusho.
Toyota Motor owns 22 percent of Toyota Tsusho, and another 11 percent of Tsusho is held by Toyota Industries, one of the member companies of the Toyota Motor Group. Companies in the Toyota Motor Group are linked by complex crossholdings, very strong supplier/customer relationships and a shared leadership group. As a result, the various companies operate in close cooperation. The fact that Toyota Motor owns more than one-fifth, and the companies of the Toyota Motor Group collectively own more than one-third of Toyota Tsusho, suggest to us that Toyota Motor bears some responsibility for Toyota Tsusho’s actions.
“Clearly, any link to providing vehicles to aid the military government’s brutal suppression in this impoverished state calls into question our company’s respect for the Principles of the United Nations Universal Declaration of Human Rights,” our letter stated. “Any link has a detrimental effect on the value of our investment in Toyota Motor Corporation.”
In a stroke of irony, in Burma, the “Toyota” name is linked to a ceremonial bureaucracy devised by the military. The military wanted to include an element of moral authority in their rule, so they created an elite order comprising 47 monks subservient to the military. To recognize their faithful service to the state, the junta awards these monks with dozens of prestigious ceremonial titles. The most well known title, Bhaddanta, is given to old monks loyal to the regime. The Burmese people mockingly nickname these prelates Bhaddanta Toyota or Bhaddanta Toshiba in reference to the lavish gifts of cars, TVs and big houses they receive in exchange for giving speeches of obedience and holding silent on issues of repression. Cars manufactured by the Suzuki/Toyota Tsusho/Myanmar joint venture may not display the Toyota brand but it’s readily on display in the nickname for the select monks known for aiding the grip of dictatorship.
As the owner of the largest block of Toyota Tsusho shares, Toyota must send a strong signal to the regime that responsible corporations in Burma cannot remain silent in the face of widespread abuses of human rights. Just before we went to press, Toyota wrote back that “Toyota has carefully considered the current environment in Burma, has conveyed to Toyota Tsusho Corporation its concerns about that environment, and has asked Toyota Tsusho to reconsider its business activities in the country.”
Toyota says its shares our concerns about the human rights situation in Myanmar. We believe they do. We look forward to learning of the results of Toyota’s letter, and what further options it is willing.
1. Legal Issues on Burma Journal, August 2001, No. 9.