Lexus Ramps Up Production-Shift Talks
The RX CUV is the only Lexus vehicle built in North America. "Now with the exchange rates the way they are, it really accelerates the thought process," the brand’s top U.S. executive says.
May 16, 2012
NEWBERG, OR – Discussions about moving Lexus production to North America are taking on a sense of urgency, a top brand official tells WardsAuto.
"We're probably having more serious conversations now than I've seen in the last 22 years," Mark Templin, group vice president and general manager for Lexus in the U.S., says in an interview during a media event here.
The strength of the yen is prompting Toyota’s luxury brand to consider building additional models outside its traditional home base of Japan. Lexus sold 198,552 units in the U.S. last year and 42,365 in Japan, according to WardsAuto data.
The RX cross/utility vehicle is the only Lexus model currently built in North America. All other U.S.-market Lexuses are built in Japan. "Now with the exchange rates the way they are, it really accelerates the thought process," Templin says.
The RX plant in Cambridge, ON, Canada, where the CUV has been manufactured for the past nine years has proven Lexus can build a quality product outside its home country, he adds.
The Canadian factory last year tied with the Lexus Kyushu, Japan, plant, also an RX production site, and Honda's Greensburg, IN, facility, for J.D. Power & Associates' Platinum Plant Quality Award, which is bestowed on the factory producing vehicles with the fewest defects.
Cambridge South, where the RX is assembled, recorded 24 problems per 100 vehicles in the 2011 J.D. Power Initial Quality Study.
While the strong yen is a motivating factor in moving some Lexus production out of Japan, there are other issues as well.
"They're never constant, either, so you don't want to rush into (making) a rash decision just based on them," Templin says. "All I can say is, thank goodness our biggest volume product, the RX, is built in North America."
The yen’s currency fluctuation means vehicles imported from Japan may sell for less in other countries than what they cost the auto makers to produce. This scenario has hampered profitability for all Japanese car companies in recent years.
Nissan's Infiniti brand has been most bullish about moving away from Japan sourcing, with its newest model, the JX CUV, built in Smyrna, TN. The auto maker is expected to announce a production shift for one of the brand's other vehicles soon.
Infiniti does not sell cars in Japan, like Lexus does. The Nissan luxury brand delivered 98,461 units last year in the U.S., its largest market.
"This is an interesting case, where you have most of the sourcing in Japan, none of the sales in Japan, and today having to source in Japan when the yen is ¥82:$1 is obviously not the right system," Nissan CEO Carlos Ghosn said at last month’s New York auto show.
Honda's Acura brand builds several models in the U.S., including the TL and new-for-'13 RDX and ILX, and is considering shifting more production to North America, American Honda Executive Vice President John Mendel told WardsAuto earlier.
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