For now, Toyota chooses shortfall over costly expansion

Pflughaupt: Caution is key
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DETROIT -- Toyota's truck sales in 2013 exceeded 272,000 Tundras and Tacomas, stretching factories to the limit and straining dealer inventories. But the company still isn't prepared to expand its San Antonio truck plant by adding another line, executives said.

"We have some optimism about the North American market," said Toyota sales and manufacturing executive Randy Pflughaupt said in an interview at the Detroit auto show last week. "But we learned from the recent recession. We need to approach big jumps with caution."

Pflughaupt wears two hats for Toyota. As group vice president of sales administration for Toyota Motor Sales U.S.A., he oversees the logistics of delivering vehicles from assembly plant to dealers. But as senior vice president of production control for Toyota Motor Engineering & Manufacturing North America, he also must carefully gauge the demand side of the equation.

Pflughaupt said a key point of Toyota's midterm strategic plan through 2025 is to determine whether to expand the San Antonio plant. The plant already is one of Toyota's fastest-moving factories worldwide, with a capacity of about 200,000 units, without overtime or Saturdays.

Toyota also has a knockdown assembly plant in Baja California, Mexico, that can assemble 57,000 compact Tacomas a year.

Toyota opened the $2.2 billion San Antonio plant specifically to build full-sized Tundras. Then the recession hit, Tundra demand plummeted, and Toyota shifted Tacoma production from its shuttered plant in Fremont, Calif., to help keep San Antonio running at full speed.

With truck demand returning, expansion is tempting. But blowing out the back wall to build another line in San Antonio could cost hundreds of millions of dollars. Plus, Toyota is still unsure if there's an additional 100,000 units of demand for its trucks -- the typical minimum volume for adding a new assembly line -- without resorting to costly incentives to push demand.

Jim Lentz, president of Toyota's North American region, said demand for Toyota trucks is about 30,000 units over present volumes. He added: "None of us has the stomach to add another 100K."

You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on Twitter


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