Special Coverage

Management Briefing Seminars

TRAVERSE CITY, MI – When it announced early last year it would build the Highlander cross/utility vehicle in the U.S., Toyota Motor Corp. said it would not include the hybrid-electric variant.

However, the auto maker now is studying that possibility, Steve St. Angelo, senior vice president-Toyota Motor Engineering and Mfg. North America Inc., tells Ward’s in an interview here.

“We’re considering building that in the U.S.,” St. Angelo says.

Last month, Toyota announced it would shift production of the Highlander from an under-construction site near Tupelo, MS, to its Princeton, IN, plant in fall 2009.

If Toyota does build the Highlander Hybrid in the U.S., St. Angelo says the auto maker also will still import units from Japan.

Toyota assembles the HEV at its Kyushu, Japan, plant, alongside its close cousin, the Lexus RX 400h.

When Toyota decided to shift Highlander production to Indiana, it also announced it would for the first time build its Prius HEV in the U.S., at its upcoming facility in Mississippi.

Also announced in mid-July was the decision to consolidate all builds of Toyota’s fullsize Tundra pickup truck at its San Antonio plant, early next year.

Currently, the Tundra is built in Princeton, as well, on the same line as the Sequoia fullsize SUV.

St. Angelo says Toyota is leaning toward building the body-on-frame Sequoia on the same line as the unibody Highlander in Princeton, rather than moving it to the line that builds the Sienna minivan in Princeton.

However, there would need to be a few bypass points on the assembly line where the Sequoia and Highlander could break away from one another and come back together.

“Once you install an instrument panel or a seat, it’s the same. But we’ve got to do a frame turnover, all the stuff you do on a frame vs. unibody – those may have to come back together,” St. Angelo says.

With Toyota’s light-truck sales down markedly in the U.S. this year, even its vaunted flexibility has been challenged. The auto maker is short of in-demand passenger cars, such as the Corolla, while having excess inventory of light trucks.

San Antonio production is down as of Aug. 8 for three months as Toyota works to rid itself of excess Tundra inventory.

St. Angelo is adamant the industry needs a method to build unibody and body-on-frame vehicles on the same line.

“We really think we’ve got to take a look at our body-on-frame and unibody builds and how to combine both productions, so you could build either/or,” he says.

Toyota has some “great people now coming up with some clever ideas” to make this dream a reality.”

As with slowing sales in the truck segment, Toyota is not immune to run-ups in the price of fuel and raw materials.

With a large supplier park in San Antonio, the auto maker thought it had developed a great solution to reduce delivery time and fuel costs.

While St. Angelo says “inventory is evil” and just-in-time parts delivery remains essential in Toyota’s world, supplier parks, at least those comparable in size with San Antonio, may no longer be viable.

“We went to the extreme with San Antonio,” he says of the 21 onsite suppliers. “It’s been relatively successful. However, should we have been so extreme, or is there some happy medium?”

St. Angelo says perhaps smaller supplier parks are a better option as a way to reduce costs associated with manufacturing.

“In Toyota, once you become a supplier, you’re part of the family; (with a supplier park) you have your family members moving into your house, which is your plant. And there’s some pros and some cons to that. So we’re still evaluating. Are the pros exactly what we thought they were? Are the cons bad enough to offset the pros?”

Meanwhile, St. Angelo confirms Toyota is looking at exporting the Sequoia to the Middle East as a way to use up capacity at Princeton, while Americans shy away from thirsty SUVs.

“We had a group of people go to the Middle East, including some from (Toyota Motor Mfg. Kentucky), to see what the true environment is like there and if there’s a good benefit to take this further,” he says of possible exports.

St. Angelo says things such as paint quality, due to intense heat and blowing sand, as well as road conditions, are top concerns when deciding whether to sell models in the Middle East.