Toyota considers moving some Lexus production to U.S.
Photo credit: Joe Wilssens
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TRAVERSE CITY, Mich. (Reuters) -- Toyota Motor Corp. is considering moving some production of its Lexus luxury brand to the United States because of the strength of the Japanese yen, the automaker's head of U.S. sales said today.
A likely candidate would be shifting production of the Lexus ES sedan from Japan to the United States, the executive, Jim Lentz, said. Because of the high cost of such a move, Toyota would have to monitor the market and the yen's strength further before making any decision, he added.
"With where the yen is today, I think it's only a matter of time" before Toyota moves more production to North America, particularly to the United States, to have assembly nearer to the U.S. market, he said.
Lentz said that in addition to the strong yen, moving production was "being driven" by engineering capabilities in the United States, including at Toyota's engineering center in Ann Arbor, Mich., where more than 1,100 engineers are employed.
Japan on Tuesday said it would extend its dollar credit facility, aimed at helping companies invest overseas, by six months as part of its efforts to cope with the strong yen.
Currently, about 70 percent of the vehicles Toyota sells in North America are made there. Lentz said that is a good level, but several factors are leading Toyota to consider raising it. He said that while Mexico is an option for more production, sending production to the United States is more likely.
"We look at North American in toto, but we do very little manufacturing in Mexico. We have one plant," Lentz said.
Nervous consumers
Meanwhile, consumer nervousness will hold back U.S. retail sales for the rest of this year, he said.
"Since the first quarter, we've seen the industry stall," Lentz told reporters after speaking here at the Center for Automotive Research's 2012 Management Briefing Seminars. "Consumers are still a little gun shy about going into debt."
Although Lentz's concerns seem to contradict the mood of a bullish rebounding industry, Lentz indicated he focused on retail sales, apart from rising volumes that are going into fleet sales.
Lentz forecasts that, minus fleet sales, the industry is on track to retail about 11.3 million-11.6 million new vehicles to consumers this calendar year -- a number he said has been roughly flat in recent months.
He said that lingering consumer nervousness over the economy is weighing down sales, and predicted it will likely continue until after the presidential election in November.
Toyota's own sales volume has been climbing steeply in recent months. Toyota Division sales rose 24 percent in July over July 2011.
However, Toyota's U.S. inventory was depleted in the aftermath of the March 2011 East Japan earthquake in the summer of 2011 and sales were depressed.
He said that overall industry trends are still encouraging, especially the increasing availability of consumer credit. He noted that lenders were becoming more active in the subprime credit market, although not Toyota's own captive finance company.
"There's a lack of confidence among consumers," he said, predicting that retail sales will rise sharply as soon as confidence returns.
Fuel cell sedan
Toyota announced more than a year ago that it would have a fuel cell vehicle for the U.S. market in 2015.
Lentz today revealed that the company's first consumer fuel cell vehicle will be a sedan. He did not say how big the sedan would be or whether it would be a lease-only car.
Lentz said he has been driving a fuel cell Highlander SUV that was produced as a test vehicle, and has been getting 300 to 320 miles per refueling of hydrogen. It takes four to five minutes to refuel the vehicle, he said.
"The big question with regard to fuel cells is going to be infrastructure," said Lentz. He would not say how many fuel cell vehicles will be available in 2015.
He said Toyota has not decided if it will roll out the fuel cell sedan in limited markets in the United States.
For Lentz's full speech, click here.
Reuters and Lindsay Chappell contributed to this report.
