By on December 27, 2010

If there’s a face of Toyota’s overinvestment in the United States market, it’s the company’s Blue Springs, Mississippi assembly plant. Construction on the billion-dollar plant was begun in 2007, but was halted in 2008, when plummeting demand for new automobiles forced Toyota to cut back on is US manufacturing capacity. For the past two years, Toyota’s 170 workers at the Mississippi plant have been doing their best to stay busy, but the Wall Street Journal reports that hiring has now been restarted and the plant will begin producing Corollas next fall. But will demand be high enough for Toyota to justify its eighth production plant in the US? Not everyone seems to think so…

After all, Toyota’s North American capacity utilization rate was a paltry 60 percent last year, although the firm does expect utilization to reach 90 percent by the end of this year. Still, with the overall market growing slowly, plant experts wonder if the Blue Springs plant actually makes sense.

So far, Toyota has limited the plant’s expected output to a relatively modest 140,000 vehicles a year, even though its capacity is closer to 200,000. Industry experts say most vehicle assembly factories in North America need to make more than 200,000 units per year to be profitable.

“If you spend that kind of money, then at a 140,000 [units] a year, it’s tough to make money,” said Ron Harbour, an automotive consultant and Detroit-based partner at Oliver Wyman. “Toyota may be guessing that higher fuel economy standards will create more demand for small cars.”

But Mississippi workers have some unusual allies in their bid for assembly work: General Motors and the Japanese Yen. When GM pulled out of its NUMMI joint venture with Toyota, Toyota relocated that plant’s Corolla production to Japan. Now, however, a rising Yen is driving Japanese auto production out of the island nation, and into places like Mississippi.

Still, there’s many a slip twixt the plans and the production, a fact well-proven by the history of Toyota’s eighth US production site. Blue Springs was originally meant to produce the Highlander, which seemed likely to be a top-seller for Toyota before the gas chocks of 2008. Then, Toyota moved to locate Prius production to Blue Springs, as sales of the hybrid soared as gas hit record high prices. Now that gas prices have come down but economic recovery remains sluggish, the less-expensive Corolla is the new vehicle of choice for production at Blue Springs. Still, plenty can change in terms of both gas prices and overall economic optimism by next fall, so there’s no guaranteeing that Blue Springs will be producing Corollas at capacity, let alone that Toyota won’t be wishing it hadn’t decided to locate a different vehicle there.

Still, for a region that has lost some 15,000 jobs since 1990 and for a state government that invested some $300m in incentives for the plant, Toyota’s announcement that the Blue Springs plant is once again hiring can only come as a welcome news.

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17 Comments on “Toyota To Restart Mississippi Plant Next Fall… But Will There Be Demand?...”


  • avatar
    John Horner

    According to an earlier TTAC piece, Toyota presently builds over 200k Corollas per year in Japan for export ( https://www.thetruthaboutcars.com/2010/10/toyota-mulling-the-end-of-the-japanese-corolla/ ). Building cars in Mississippi for the US market is certainly cheaper than building them in Japan and shipping them across the Pacific, especially since the majority of the US’ population is within 1k miles of Mississippi. The Corolla is a well establish bread and butter car which sells to people looking for reliable transportation, low running costs and a low purchase price.
    Toyota is making a smart move.
     

    • 0 avatar
      mpresley

      But is building a Corolla in the US cheaper than VW’s Mexican made Corolla-killer, the New Jetta?, that is supposed to (according to Wolfsburg), take the crown (no pun) from Toyota?  Personally, I don’t think any car will beat down the Corolla when it comes to reliable, basic transportation, unless it is one of the new Korean models.

  • avatar
    Educator(of teachers)Dan

    Hmmmmmmmmm so what was the point again?  If I was Toyota I’d quietly start shopping this plant to Hyundai or Kia.

  • avatar
    Zackman

    Here I go again trailing Dan, but here’s my two cents’ worth: Is there a bubble about to burst here?

    BTW, Dan, we wish you all the best on your upcoming big day, whenever that may be. Congratulations once more!

    • 0 avatar
      Educator(of teachers)Dan

      BTW, Dan, we wish you all the best on your upcoming big day, whenever that may be. Congratulations once more!
       
      Don’t worry you’ll know when the big day happens cause I’ll have to follow it up with a “New or Used” (yes another one if you search the archive) asking about my candidates for my evolving situation.

  • avatar
    newcarscostalot

    Congrats Dan! :-)

  • avatar
    forraymond

    The Corolla is still a big seller.  With exchange rates, it sort of makes sense.  They should include the Matrix in that production (and rename it Corolla Sportback or something using the brand equity).  They should also make a small MPV on that frame.
     
    If the line if flexible enough, the new Prius MPV is going to be a huge hit. HUGE!  And they will need production here.

  • avatar
    Canuck129

    I’m not sure what Japanese production really has to do with this, when they make over 200k per year of these things in Canada for the N.A. market. 

    • 0 avatar
      brettc

      I’m confused about that as well. Why would they build Corollas in Japan for the U.S. market? It seems that the Cambridge, Ontario plant could build them for the U.S. market. Unless Canadians are buying up every Corolla that Cambridge can build.

  • avatar

    In a recent press release, Toyota announced that in 2011, they plan for an increase of (from their viewpoint) overseas production of 6 percent, while domestic production will be reduced by 5 percent. This is for the Toyota brand only. For the complete Toyota Motor Corp data, please refer to the linked document. Due to the high yen, Toyota (and any Japanese companies that can) try to move as much capacity as possible overseas. Next year, Toyota (brand) wants to have 60% of their production abroad and 40% in Japan.

    Due to their model mix, Toyota sales are very gas price dependent. When gas prices go up, their sales rise with them. USA Today reports that “the run-up in gas prices past $3 a gallon has been running down the value of used SUVs, causing prices to plummet below levels listed in well-known buying guides.” The price of oil is seen creeping up. Making cars is making long term bets on commodities and currencies – frightening thought.

  • avatar
    geozinger

    More Toyota damage control. With this stalled plant, their reputation for always making the right move has taken a beating. NUMMI, the Tundra plant in Texas, and including this Mississippi plant are all evidence of over-reaching and over-estimating the North American small car market before the equity crash.
     
    With Hyundai/Kia ramping up car production in the US and the VW plant in Chattanooga coming on-line soon, the car industry has absolutely gone bonkers in over-capacity. The industry was in over capacity worldwide before 2008, now there are new plants opening all over the southern part of the US. Many manufacturers like Honda, Toyota, VW, Hyundai, GM and Ford have Canadian and Mexican plants capable of serving the NAFTA market and now there are duplicates in the US. These facilities are getting more flexible and efficient in producing automobiles seemingly every year.
     
    What are these companies thinking?

  • avatar
    Trend-Shifter

    An interesting sidenote…

    I am in the states this week visiting in the Chattanooga area.   My wife’s father is in the hospital and many local family members are at the hospital with us.   We have a lot of time to talk between ICU visiting times.  

    Being from Michigan they love to rub in that VW, various auto suppliers, and Amazon are all expanding in the Chattanooga area.  

    While on the subject, one un-named relative works for a famous auto supplier with operations in Michigan, Tennessee, and Mexico.   The supplier has been pulling a lot of production out of Mexico and moving it into the Tennessee facility.   (With the Peso exchange rate ands labor rate that doesn’t make sense)    He has heard that they were just hedging their bets because they are very concerned about the impact of the drug cartels on their future operations.  

    So perhaps this is also influencing Toyota not to go the Mexico route in the future for NA production and bring the Mississippi facility online. 

    • 0 avatar
      geozinger

      @Trend: That mess in Mexico is a sore festering at our southern border, with potentially explosive consequences. I believe that eventually it will spill over into the US (if it hasn’t already) and tie up more law enforcement resources than we have/want to allocate. I think there’s a reason why the National Guard patrols areas of the border.
       
      OTOH, there are still plenty of multinational companies who have no problems with facilities in the Matamoros area, even in light of the alleged serial killer that stalks women there and other drug-related killings.
       
      As far as I can tell, Toyota only has the one plant in Tijuana, building Tacos, I mean Tacomas. If the poop hit the fan, they could shift production somewhere else in the NAFTA zone. Regardless, I still think that the compact car scene is about to heat up and they will still have too much capacity.

    • 0 avatar
      Steve65

      “That mess in Mexico” is pretty much entirely a consequence of the US’s stupid dogmatic insistence on criminalizing possession of unapproved plants. It’s already here.

  • avatar
    Steven02

    Close NUMMI reopen a plant without the UAW.  This is the sole reason they wanted out of NUMMI.

  • avatar
    Sgt Beavis

    A nice shiny new plant in the heart of “anti union” USA.

    Those folks at NUMMI should pay close attention to this because it’s the real reason they no longer have a job.

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