Global Economics

Toyota's "Born In U.S.A." Blitz Rolls On


Still wary of anti-foreigner feeling as it overtakes GM, the Japanese carmaker will build a sport-ute plant in Mississippi to further boost local production

And the winner is…Mississippi. It's been a long time coming, but Toyota (TM) has finally decided the location of its eighth North American plant. According to a Feb. 27 press release, Toyota chieftains have chosen Blue Springs, Miss., as the location for a new plant to build Highlander sport-utility vehicles.

The Japanese press claims Toyota chose Mississippi because of low labor costs relative to northern states, its closeness to the company's engine plant in neighboring Alabama, and expectations that population growth will spur demand in the southern U.S. auto market.

The announcement may help deter anti-Toyota feeling in the U.S. At a time when Toyota is closing in on GM (GM) as the world's largest automaker and Detroit is struggling, the Japanese company is wary of tarnishing its image in the U.S. "We constantly need to think about the potential backlash against us," Toyota Chief Executive Officer Katsuaki Watanabe told BusinessWeek on Feb. 16. "It's very important for our company and products to earn citizenship in the U.S. We need to make sure we're accepted (see BusinessWeek.com, 3/5/07, "Talking With Toyota's Top Man")."

Surge in Exports

Toyota will spend $1.3 billion building the factory, with production scheduled to begin in 2010. The new plant—which will have a capacity of 150,000 units—and several other new facilities are expected to raise Toyota's North American production capacity by around 400,000 to 2.2 million.

In addition to the new plant in Mississippi, last fall a new Tundra truck plant went online in Texas, and this spring Subaru Indiana Automotive (SIA) will also begin making Camry sedans. (Toyota owns a stake in SIA parent Fuji Heavy Industries.) Next year, a new Toyota plant in Canada will also begin producing RAV4 crossover SUVs. All told, that should increase the proportion of locally produced Toyota vehicles in North America to around 65% by 2010, compared to 54% in 2006.

More U.S. production will also help Toyota reduce dependency on domestic Japanese production. Despite Toyota's opening numerous overseas plants in recent years, rising global demand has led to a surge in exports, stretching local facilities. Last year Toyota's Japan exports rose by 23.6% to 2,712,541. Overseas production increased by 8.6% to 3,932,186.

Still, another new SUV plant alone won't be a cure-all. One reason is that Toyota's growth in the U.S. has a habit of outstripping the speed with which it can open new plants. Another is that Toyota's recent export surge is partly due to high demand for small, fuel-efficient cars, such as the Japan-built Yaris subcompact. Small wonder, then, that Toyota-watchers say the new Mississippi plant is unlikely to be the company's last.

Rowley is a correspondent in BusinessWeek's Tokyo bureau.

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