Wednesday, June 17, 2009

Toyota-GM U.S. Plant Said to Be Considered for Prius

Toyota Motor Corp., after shelving plans to build Prius hatchbacks at a factory in Mississippi, is considering making the hybrid at a California plant shared with General Motors Corp., two people familiar with the plan said.

Toyota expects strong demand in the U.S., where the new model went on sale this month and is raising output in Japan. Given the time and cost to finish the half-built Mississippi facility, it may be easier to make the car at New United Motor Manufacturing Inc., known as Nummi, said the people who asked not to be identified because the discussions aren’t public.

“Toyota put Mississippi in mothballs and as they look around at capacity already in place, Nummi might make sense,” said Jim Womack, chairman and founder of Lean Enterprise Institute in Brookline, Massachusetts. “Nummi builds Corollas, and now that Prius comes off the same underbody pan, it wouldn’t be much of a stretch to build it on the same line.”

Toyota’s outgoing President Katsuaki Watanabe called Prius a “savior” for the world’s largest automaker after it drew more than 80,000 consumer orders before going on sale, a rare bright spot as the company reels from its worst earnings slump in six decades. Prius was Japan’s top-selling model in May.

“The plan is still to build Prius in Mississippi as soon as demand and this economy turn around,” said Jim Wiseman, vice president of external affairs for Toyota’s North American manufacturing unit. Wiseman said he’s unaware of discussion within Toyota to build Prius in California.

Toyota shares gained 0.5 percent to 3,720 yen at the close of trading in Tokyo today.

GM’s Bankruptcy

Toyota and GM have shared the Fremont, California, plant since 1984, running it as a joint-venture equally owned by the two largest carmakers. On June 1, the day GM filed for bankruptcy, Chief Executive Fritz Henderson said his company had no plan yet to get vehicles from Nummi after the Pontiac Vibe goes out of production there next year.

“We’ve talked to them about what we might do and whether or not we have any interest in going forward in even being part of it,” said Henderson.

The factory’s future was called into question by GM’s bankruptcy, which includes closing 12 more plants by the end of 2011 under an accelerated plan to shutter 30 percent of its U.S. assembly sites. Along with the Vibe, derived from Toyota’s Matrix model, Nummi builds Toyota’s Tacoma pickups and Corolla small cars.

Blue Springs

While Detroit-based GM owns half of the plant, Toyota models accounted for 76 percent of output through June 13, according to trade publication Automotive News. GM is dropping Pontiac as part of its plan to shed four of eight U.S. brands.

The factory is California’s only large auto-assembly plant and the only such facility on North America’s West Coast. It has the capacity to make 420,000 cars and trucks a year and employs about 5,400 people, according to the plant’s Web site.

Toyota on Dec. 15 halted work on the $1.3 billion Blue Springs, Mississippi factory after plunging U.S. sales created excess capacity at its North American plants. The company early this year said it would pay the interest on bonds issued by Mississippi for plant-related infrastructure.

The Mississippi facility was to produce Highlander SUVs before Toyota said in July 2008 the factory would make Prius hatchbacks by 2010. In March, Jim Lentz, Toyota’s U.S. sales chief, said “it’s conceivable” that another model could be built there.

California is a costly place to make cars and auto parts, limiting Toyota’s ability to set up a North American supply base for batteries, electric motors and other components needed for gasoline-electric models, said economist Kim Hill, with the Center for Automotive Research in Ann Arbor, Michigan.

Still, Nummi is already supplied with parts shipped across the Pacific from Japan, so it wouldn’t be difficult to keep the factory stocked with the batteries, motors and other components needed for Prius, said John Shook, a University of Michigan management instructor and former Toyota engineer.

“Given how popular Prius is in California, and the push there for plug-in and electric vehicles, there’d certainly seem to be local support to build it there,” Shook said.