Alabama stands to benefit from Toyota’s 30 percent boost in U.S. spending

Alabama stands to benefit from Toyota’s 30 percent boost in U.S. spending
Gov. Kay Ivey greets executives at the groundbreaking of the Mazda Toyota Manufacturing USA Inc. groundbreaking in Huntsville. (Mazda Toyota Manufacturing USA)

Toyota Motor Corp. is adding about $3 billion to a years-long U.S. investment plan in which Alabama is a major beneficiary.

The added spending raises the amount Toyota is investing in the U.S. to almost $13 billion over a five-year period ending in 2021. This includes a new $750 million outlay across several plants, the largest of which is the $288 million expansion of its engine plant in Huntsville, creating 450 additional jobs.

On Thursday, Toyota announced a $288 million expansion of its engine plant in Huntsville, creating 450 new jobs. (Toyota)

“Today’s news really builds on our already expansive presence in the U.S.,” Jim Lentz, chief executive officer of Toyota North America, told reporters on a conference call. “At a time when others are scaling back, we believe in the strength of America.”

In November, Toyota and partner Mazda Motor Corp. broke ground on a $1.6 billion joint auto plant in Huntsville, eventually creating 4,000 jobs.

Japan’s largest automaker has tried to work its way into President Donald Trump’s good graces after being a target of his tweets when he was still president-elect in January 2017. Days after drawing criticism for plans to build Corolla cars in Mexico, Toyota announced a $10 billion, five-year investment plan.

Lentz said the decision to further amp up the investment reflects Toyota’s credo to build cars where they’re sold, as well as increasing U.S. demand for its vehicles. But he also said a new North American trade deal and tariff threats also contributed to the moves.

“I’d be disingenuous if I said we didn’t have an eye on trade,” he said.

A robot assists with the groundbreaking of the $1.6 billion Mazda Toyota Manufacturing USA plant in Huntsville. (Mazda Toyota Manufacturing USA)

‘Fixing’ NAFTA

Trump congratulated Toyota by tweet about 80 minutes after the company’s announcement and linked the investment to the U.S.-Mexico-Canada Agreement, or USMCA, the still unratified deal intended to replace NAFTA.

While Lentz didn’t identify other companies that are scaling back in the U.S., Toyota’s announcement comes a week after General Motors Co. shut the first of four plants it’s closing in the country over the next year as it jettisons slow-selling sedans. Ford Motor Co. also is eliminating thousands of jobs in the midst of an $11 billion restructuring.

Tariff risk

For all of Toyota’s efforts to appease Trump, it’s far from out of the woods. The president asked the Commerce Department last year to investigate whether imported cars and parts pose a national security threat, and has been mulling a potential increase in tariffs to as much as 25 percent. Toyota and other automakers have warned this would harm the economy by jacking up car prices – even of U.S.-built models like the Camry sedan – and undercutting sales.

A Toyota RAV4 XSE hybrid vehicle. (Patrick T. Fallon/Bloomberg)

The only hybrids Toyota makes now in the U.S. are gas-electric versions of its Camry and Avalon sedans and the Highlander sport utility vehicle. After a $238 million retooling at its factory in Kentucky to build gas-electric versions of the top-selling RAV4 crossover and Lexus ES sedan, Toyota reduces trade risk for a key model that’s been entirely imported from Canada and Japan in the RAV4.

Toyota isn’t ruling out eventually producing a gasoline-only version of the RAV4 in Kentucky if demand for the vehicle continues to grow, Chris Reynolds, chief administrative officer for North America, told reporters. The company already produces the conventional Lexus ES in Kentucky.

Lentz said about 10 percent of ES and roughly 12 percent of RAV4 sales in the U.S. last year were for the gas-electric versions. “We think there’s going to be increased demand, especially for hybrids,” he said.

(Contact the reporter at [email protected].)

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