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Toyota Stops U.S. Full-Size Truck Production, Repurposes Mississippi Plant
11 Jul 08
The Japanese automaker is responding to tumbling truck demand, shuffling production at three of its U.S. plants over the next year.
Global Insight Perspective | | Significance | Toyota has confirmed that it will build the next generation Prius hybrid at its new Mississippi plant which is still under construction, moving the Highlander CUV that was supposed to be produced there to its underutilised truck plant in Princeton (Indiana). Production of the full-size Tundra pick-up and Sequoia SUV, currently at Princeton, will be shifted to the new San Antonio (Texas) plant, which currently makes only the Tundra. | Implications | In addition, Toyota has announced that it is stopping production of the Tundra and Sequoia from 8 August until early November, but will keep its employees working and paid through training programmes and plant improvement projects. | Outlook | The moves show just how deeply the changes affecting the U.S. auto market are running, as a company like Toyota, known for its long-term planning and foresight, is being forced to make drastic and serious changes in rapid fashion. |
Toyota made a stunning and dramatic change to its truck production plans in the United States yesterday, confirming earlier reports that it would repurpose its Blue Springs (Mississippi) plant currently under construction to build Prius hybrid sedans instead of Highlander crossover utility vehicles (CUVs). Production of the Prius will start at the greenfield plant in late 2010, according to the company. But in addition to the Prius news, Toyota further announced that it would shift production of the Highlander to its existing Princeton (Indiana) plant, with production slated to start there in the third quarter of 2009. This means Toyota will move production of the full-size Tundra pick-up and Sequoia sport utility vehicle (SUV) currently built at Princeton to its new San Antonio (Texas) plant, where the Tundra is currently built. Furthermore, Toyota is suspending production of the Tundra and Sequoia beginning 8 August and lasting until early November, three full months in which it will stop producing the barely year-old truck. "The truck market continues to worsen, so unfortunately we must temporarily suspend production. But this good news about production mix demonstrates our long-term commitment to our North American operations and to our team members, supplier partners, and communities where our plants are located," said Jim Wiseman, vice president/external affairs for Toyota Motor Engineering & Manufacturing North America, in a statement released by the company. Toyota has further said that none of the plant closures or retooling will result in layoffs at the plants; the company plans to keep its employees active and working with training and plant improvement projects for the full three months that full-size truck production is shut down. "By using this downturn as an opportunity to develop team members and improve our operations, we hope to emerge even stronger," said Wiseman. Toyota has already dismissed 200 temporary workers at its San Antonio plant, and an unknown number from its Princeton plant. Outlook and Implications The news from Toyota was a stunning reversal of plan for a company that prides itself on long-term foresight and measured reactions, but is a jarringly clear sign of just how seriously difficult the U.S. auto market is at the moment. For the automaker to stop production of its full-size trucks for three full months, not even two years after introducing the vehicles, speaks volumes about how difficult Toyota feels the full-size truck market has become in the United States. Keeping its employees still working through various projects has been likened to the United Auto Workers (UAW) union's Jobs Bank that is a feature for the Detroit Three's contracts, but there is a big difference here in that Toyota actually requires work from its employees. They will be kept busy with training programmes, plant maintenance, and myriad other activities to keep them fresh for when production eventually does resume in November. As for repurposing the Mississippi plant to make the Prius instead of the Highlander, the change is not as simple as declaring a new product there. The challenges are likely to be twofold: determining how to supply the new Prius with components that are currently largely sourced from Japanese locations, and what to do about suppliers that have built ancillary plants to supply the Highlander in Mississippi and Tundra/Sequoia in Indiana. Toyota has scrambled to expand production of batteries at its Japanese Prius plant, as demand for the hybrid sedan has skyrocketed in the United States to the point where Toyota has run out of inventory and seen sales actually drop in June because of it. Dealers are charging as much as US$3,000 over sticker price according to Bloomberg News, and waiting lists are stretching as much as six months. Building the hybrid in the United States makes sense, and the Mississippi plant is not nearly far enough along yet that it would be any kind of serious difficulty for Toyota to switch what it builds there. However, suppliers like seat-maker Toyota Boshuku America and Toyota Auto Body Co. Ltd., have already begun construction of nearby ancillary plants to supply what was supposed to be their contracts for the Highlander programme. Toyota has not yet determined how suppliers will be compensated for the switch according to Automotive News, nor how it will deal with getting those suppliers up to what will now be the Highlander plant three states away. Or what to do with the Tundra/Sequoia suppliers in Indiana that now will not have anything to supply, since production will be moving to Texas. A spokesperson suggested that new contracts for the shuffled vehicles may be handed out to suppliers who had previously thought they were getting other vehicles, but nothing has yet been confirmed. An equally big question will be how Toyota goes about sourcing the high tech components for the Prius. It already makes the hybrid version of the Camry in the United States, so presumably there is a pre-existing pipeline in place to supply such components, but with Prius volume likely well in excess of the few tens of thousands of Camry Hybrids built each year, those sources will almost certainly have to be expanded.
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