Toyota To Restart Mississippi Plant Next Fall… But Will There Be Demand?

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…

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.