Toyota, Mazda spend big on more N.A. capacity

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Thu Jan 11, 2018 12:23 pm

Toyota, Mazda spend big on more N.A. capacity
January 10, 2018 @ 9:28 pm
Lindsay Chappell

MONTGOMERY, Ala. -- Toyota and Mazda will spend $1.6 billion to add factory capacity in a softening U.S. market, but both automakers say the time is exactly right.

Toyota will build the next-generation Corolla and Mazda an unnamed new crossover starting in 2021 at an assembly plant to be constructed just west of Huntsville, Ala.

The factory's combined plant capacity will be 300,000 vehicles a year -- roughly the number of vehicles by which U.S. auto sales declined in 2017.

The two companies detailed the investment here Wednesday in an auditorium full of Alabama elected officials and public service providers, saying the project will create 4,000 factory jobs and enable the automakers to take a new approach to engineering and building vehicles.

The project will be operated as an independent joint venture that has not yet been named, delivering 150,000 Toyota Corollas and 150,000 units of the Mazda crossover.

"We need the Corolla capacity," Toyota Motor North America CEO Jim Lentz told Automotive News during the event. "We sold about 330,000 Corollas last year, and 50,000 in Canada. This plant, with our other Corolla plant in Mississippi, will give us capacity of 310,000.

"So yes, even in this soft market, we need this capacity."

Lentz acknowledged that car sales are declining in the U.S. market. Compact car sales, including the Corolla, fell 5.8 percent in 2017.

But Lentz said the compact car segment is resilient and demand for the Corolla -- Toyota's biggest volume product globally -- remains strong despite the drop in 2017 volume.

Each partner sees the Huntsville project as an opportunity to improve its position in the U.S. market.

Product revival

Mazda Motor Corp. CEO Masamichi Kogai, who attended Wednesday's announcement here, is hoping to lead Mazda into a product revival starting in 2019, with a portfolio of new vehicle designs and fuel-efficient technologies.

He said that by partnering with Toyota on the plant, Mazda will be able to move ahead but with lower manufacturing costs.

Toyota Motor Corp. President Akio Toyoda, who shared the stage with Kogai , said Toyota is also planning for a new era of advanced products.

The Alabama-built Corolla will be the car's first conversion to what Toyota is calling the Toyota New Global Architecture, a corporate-wide move to more advanced powertrains and lighter vehicles that can be manufactured more easily and updated with greater flexibility.

No pressure

The new Toyota-Mazda plant originally was supposed to be built in Mexico. That plan took some abuse last year when President Donald Trump criticized Toyota via Twitter for building the project in Mexico instead of the U.S.

But Lentz said the decision to move the project to the U.S. was not a reaction to political pressure. He repeated what Toyota officials said last year -- that moving the Corolla project to a U.S. location simply freed up the proposed Mexico site -- which was further along in development -- to instead become a smaller plant to produce Toyota's midsize Tacoma pickup.

"It wasn't politics that drove the change," Lutz said. "We're still building the plant in Mexico," Lentz said. "But we need 100,000 Tacomas. The combination of our plants in Mexico and Texas gets us nearly 475,000 pickups, which is our forecasted need.

"We need more truck capacity as fast as possible."

Also driving the urgency is Toyota's plan to alter its manufacturing footprint in Canada. Toyota will end production of the Corolla in Cambridge, Ontario, and replace it with the top-selling RAV-4 compact crossover. That plan has been in motion since 2015 and Toyota needs to be ready to phase out Corolla production there.

Furious site search

The change of plans -- deciding last year to build the new Corolla plant in the United States rather than Mexico -- meant that a furious site search ensued across the United States. Toyota and Mazda considered more than 100 factory sites in 22 states, including five in Alabama alone, for the fast-moving project.

Huntsville's final competitor was a location near Greensboro, N.C., which would have become North Carolina's first auto assembly plant.

To land the Toyota-Mazda project, the state of Alabama provided $370 million in public incentives, including tax abatements and footing the bill for various project costs. That figure does not include the expense of ongoing employee training, which the state also will pay for, various costs associated with site preparation, or other incentives kicked in by local governments around the Huntsville property.

Officials said Wednesday that the final tally of all public incentives for the project has not been completed. ... t-strategy
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