Glut of trucks pulls Prius to U.S.

Toyota had sought to keep hybrid output in Japan

lchappell@crain.com

Plummeting truck sales last week forced Toyota Motor Corp.'s hand on a difficult decision — moving the hot-selling Prius hybrid to a U.S. factory.

Toyota had been reluctant to let its fast-rising hybrid star get away from its protective watch in Japan. But with consumers shunning pickup trucks and SUVs, Toyota said last week that it will move the Prius not just to America but to a greenfield site in Mississippi with untested workers.

The Blue Springs, Miss., plant had been scheduled to assemble the High-lander SUV.

Sources familiar with the plans said that only a week before the announcement, Toyota officials were still debating whether Prius production should move to the United States.

Why not NUMMI?

Toyota had kept Prius production in Japan because suppliers of hybrid powertrain parts are there. Also, industry observers say that Toyota had wanted to keep a watchful eye on the valuable technology, although it does assemble a small number of Priuses in China.

Hybrids use an internal combustion engine and one or more electric motors to power the wheels. On the highway, the Prius gets 45 mpg, while the standard Highlander gets 24 mpg and the Highlander Hybrid gets 25 mpg.

One source said that Toyota has been leaning all year toward assembling the Prius at its 50-50 joint venture with General Motors, New United Motor Manufacturing Inc., in Fremont, Calif. NUMMI, they were assuring themselves, has an experienced work force and is in the middle of green-hungry California.

But last week, the dire outlook for Toyota's trucks in the United States moved the Prius to Mississippi instead. With steel structural beams already standing over the massive building site, Toyota opted to convert the project into a Prius factory. Production will launch in late 2010. Toyota will restyle and re-engineer the car next year.

Tundras in Texas

Toyota must ask as many as seven key SUV suppliers around Blue Springs to alter their own factory plans to produce Prius parts instead of SUV parts. Annual volume is undetermined, the company said. Last year, Toyota sold 181,221 Priuses in the United States. Also not determined is whether a supplier will build propulsion batteries for the Prius in the United States, Toyota said.

Last week, Toyota dealt with another nagging problem: It will consolidate production of Tundra pickups at San Antonio, starting next spring, instead of having both San Antonio and a plant in Princeton, Ind., continue to build Tundras at rates below capacity.

Toyota spent $1.3 billion to open San Antonio in 2006 with expectations that it eventually would sell 25,000 or more of the full-sized pickups a month. The market shift has left Toyota averaging closer to 13,000 a month this year.

Toyota also said it will move the Highlander into the underused Princeton plant, starting in fall 2009. And beginning on Aug. 8, it will suspend production of Tundras and Sequoia SUVs until November. c

You can reach Lindsay Chappell at lchappell@crain.com
Tags: Retail

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