Blue Springs Plant Still Awaits Green Light

DETROIT – By now, some 2,000 employees were supposed to be settling into their new jobs at Toyota Motor Corp.’s greenfield manufacturing plant in Blue Spring, MS, assembling about 150,000 vehicles annually.

Instead, the completed plant sits vacant, and near-term prospects for production are bleak, Yoshimi Inaba, president and COO of Toyota Motor North America, tells journalists here in a roundtable interview at this week’s North American International Auto Show.

In February 2007, when the Japanese auto maker announced plans for the 1,700-acre (688-ha) site in Mississippi, the anticipated investment was estimated at $1.3 billion and the initial product was going to be the Highlander cross/utility vehicle.

With brisk demand for the Prius hybrid-electric vehicle, Toyota changed course and said it would produce the Prius in Blue Springs, while the Highlander would move to the auto maker’s Princeton, IN, plant.

The Highlander did move to Princeton, but the Prius plans soon were derailed as the global economy plunged into recession.

Today, the finished building has no assembly equipment inside. Toyota had hired about 100 employees for the facility, and some have been temporarily dispatched to other locations.

Spokesman Mike Goss says a handful of Japanese staff at the plant finished their U.S. assignments and returned to Japan. About 75 employees work onsite now, preparing to begin hiring and initiating plant policies in anticipation that improving vehicle sales will encourage Toyota to start production in Blue Springs.

Once the green light is given, it will take 18 to 24 months to order, install and test equipment before the first salable vehicle rolls off the assembly line, Goss says.

Yoshimi Inaba, president and COO Toyota Motor North America

Inaba says the plant’s future rides on the economics of the North American industry.

“Too much of it is depending on where the market goes,” he says, adding that a “strong recovery” is necessary. “Hopefully, we can make this decision sooner rather than later.”

Inaba says Toyota is “trying to utilize the North American plants as much as possible,” and that the auto maker’s capacity utilization rate is still “over 90%,” considered healthy in a down market.

Toyota imported 664,902 cars and light trucks into the U.S. in 2009, meaning it produced in North America 62% of the 1.8 million vehicles it sold in the region, according to Ward’s data.

Rival Honda Motor Co. Ltd. imported 186,640 light vehicles in 2009, which translates into domestic production of 84% of the 1.2 million vehicles sold. Honda boasts its domestic production rate has exceeded 75% since 1996.

Aerial shot of Blue Springs plant, taken last February.

Despite its heavier reliance on imports, Toyota says it does not plan to emulate Honda’s import mix, although Inaba says the auto maker will continue striving to produce domestically at least 60% of the vehicles sold here. The strong yen and weak dollar also makes North American production vital to the bottom line for Japanese OEMs.

“I think each company has its own situation and number of models and where it’s best produced in terms of volume,” he says. “We will remain committed to this market strongly. Therefore, whenever possible, we like to produce (vehicles) here.”

The Blue Springs experience has forced Toyota to be “more cautious” about North American investments, Inaba says. “Over the past seven to eight years, it’s always been expansion and trying to catch up with demand.”

When asked if Toyota’s North American operations will return to profitability this fiscal year, Inaba says, “I think we are improving, yes. For example, the finance company is having a solid year. It’s a very encouraging sign.”

The auto maker also is making a profit on the Prius here, he says. “This is the third-generation Prius, and each time we come out with a new version, we see improvement on profit.”

With regard to the massive recall of 4.2 million Toyota vehicles due to safety concerns about unintended acceleration, Inaba says he is confident the auto maker’s decision to shave down accelerator pedals and install brake override systems will put the matter to rest.

An ill-fitting floor mat in a rented Lexus ES 350 has been linked to an August crash that claimed the life of an off-duty California highway patrolman and his family.

“I think this solution we have announced and soon to be implemented is addressing a root cause of this issue,” he says. “I think we are still among the safest and most reliable cars on the road.”

In the wake of the accident, Inaba says Toyota has strengthened its ability to collect and study technical information about everyday uses of its vehicles. “We are doing everything possible to improve our quality.”

Still, the floor-mat issue gave Toyota the highest number of recalled vehicles in the U.S. in 2009 (4.8 million), a first for the auto maker.

Inaba tips his hat to his U.S. and South Korean rivals, saying he drove several vehicles from General Motors Co., Ford Motor Co., Hyundai Motor Co. Ltd. and Kia Motors Corp. a month ago.

“I’m impressed with all these in their quality improvement,” he says. “We thought we were ahead of them, but they are catching up very quickly. The only thing we can do is to be better.”

In identifying specific areas he wants the auto maker to address, Inaba says Toyota vehicles must be “fun to drive. That is another element we have been talking about a lot – emotional styling.”

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