Toyota's IN-YOUR-FACE Texas Invasion

SAN ANTONIO, TX — The JLC cattle ranch, established in 1794, will never be the same.

Stretching over 2,000 acres (809 ha) on a flat, barren plain some 15 miles (24 km) south of downtown San Antonio, the ranch by 2006 will begin production as Toyota Motor Corp.'s sixth North American assembly plant.

But it's not just any plant. As Toyota continues its drive to conquer every bastion of the U.S. Big Three and boost its U.S. market share to 15% from 10.4% in 2002, the San Antonio facility carries heavy symbolism: It will produce Tundra fullsize pickups at a clip of 150,000 annually, deep in the heart of the Big Three's most treasured region.

Taking on the Big Three in Texas is in-your-face hardball, but the Americans aren't likely to relinquish without a battle. “Bring them on,” smiles Cheryl Fodera, controller at Southway Ford, located a few miles from the Toyota site. “We have no fear.”

Toyota currently is a minor player in the Texas pickup market. In 2001 (the latest data available), Toyota light truck registrations in the state totaled 54,150. That compares with market-leader General Motors Corp.'s 286,091, Ford Motor Co.'s 278,575 and Chrysler Group's 146,744.

In 2002, Toyota sold 99,333 Tundras in the U.S., down from 108,863 in 2001. GM sold 647,748 Chevrolet Silverados and 200,146 GMC Sierra fullsize pickups while Ford sold 813,701 F-Series models and Chrysler delivered 396,934 Ram pickups, according to Ward's data.

That's a huge 2 millon-per-year fullsize-pickup market — 13.2% of total U.S. light vehicles in 2002 — making it too tantalizing to resist. Nissan Motor Co. Ltd. seeks a chunk with its Titan pickup, which starts production in Canton, MS, in 2005.

The Big Three also have new firepower. U.S. pickup buyers are loyal, and sales champion Ford will launch a new F-Series this summer. Dodge redid Ram a year ago, and GM's big pickups, redone in 1998, likely will be revamped before Tundras roll off the line here three years from now.

But Toyota's 150,000 units planned initially for San Antonio may be just the beginning. There's already talk of expanding the plant to include additional spinoffs, and there remains 600 more acres (242 ha) on the Toyota property if it's needed.

There's little activity at the site. Toyota erected a sign there, behind barbed wire that keeps in cattle, and signs everywhere welcome the auto maker. Infrastructure work is beginning, and companies supplying Toyota's Princeton, IN, plant where Tundras have been built since 1999 are developing logistics strategies.

A Toyota spokesman says many suppliers likely will be the same as at Princeton, including Dana Corp., Johnson Controls Inc. and Lear Corp., but “no decisions have been made yet,” he says.

How did San Antonio, with a population of 1.2 million (only 4,000 of Japanese heritage) but known mainly for tourism, farming and a military community, land Toyota? It wasn't tough, says Robert Peche, senior vice president of the San Antonio Economic Development Foundation, which worked with the city and state on the project. The reason: Toyota already had targeted the San Antonio area, he says.

Toyota looked at several states and 19 locations in central and northern Texas, Peche says, and had considered Austin, the state capital, as a possibility. But San Antonio, and especially the JLC Ranch property combined with adjacent acreage owned by the San Antonio Water System, became an alluring choice, he says.

There were other reasons: A large labor pool, particularly in the struggling south side of the city; existing water, sewer, gas and electric facilities close by; rail service (spurs need to be built to the plant); proximity to Interstate Highways 410, 37 and 35 and good secondary highways; and a source for training and new hires from nearby Palo Alto Community College.

Toyota is not yet accepting applications for the 2,000 workers it will hire, but it's getting assistance from the Alamo Workforce Development Authority and the state, says Peche. He reckons the San Antonio metro area has 800,000 workers. Unemployment is just under 5%, below the national average.

“These will be créme de la créme jobs starting at $15 to $17 an hour and working up to $24,” Peche says. A journeyman mechanic at a local dealership makes about $16 hourly, and that's considered high. Toyota says wages will average $21, plus perks. Plant payroll is estimated at $78 million annually.

Toyota will invest $800 million in the plant. Ward's earlier reported studies indicating the plant could generate $1.8 billion in investments by suppliers and others, creating 16,000 jobs and $962 million in wages.

The city and state together put up $133 million in incentives to woo Toyota, a tidy sum but small compared to other recent automotive plant deals. Alabama, for example, awarded the former Daimler-Benz AG $253 million to locate its SUV plant there in 1993 and another $119 million for an expansion now under way.

San Antonio reportedly paid the ranch owners $16 million for their parcel and donated it to Toyota, which says it will return $2 million for the land. Other state and city cash will go for infrastructure improvements, training and the like.

Toyota, however, will voluntarily give back $65 million in all, including $24 million to the local school system, which will lose part of its revenues due to a 10-year tax abatement.

A University of Texas-San Antonio study, however, indicates lost taxes will be recouped within 2 1/2 years via increased sales taxes collected in the area. The study indicates that over 10 years the facility will generate $1.6 billion in wages and state and local tax revenues totaling $1.1 billion. “It's huge,” says Laura Lorek, a reporter for the San Antonio Express-News who has covered the Toyota story. “It's one of the biggest windfalls in our history.” She adds with a tinge of irony: “We're now moving into industrial development when most people are moving into the information age.”

Perhaps surprisingly, south side auto dealers say they welcome the newcomers. W.P. (Bill) Sims Jr., customer relations manager and son of the owner of Southway Ford located on an automotive row alongside I-35, observes: “I think it's going to be great. Toyota will pump money into the area and give us an opportunity to sell more cars and trucks.”

One of the largest Ford dealers in Texas — and the U.S. — Southway sold 3,600 new vehicles, including 2,538 trucks and SUVs, last year, says Sims. “They're coming right in Ford's backyard, and they've thrown down a challenge,” says Sims. “They say they're ready, so we say we're ready, too. We've seen the new F-Series, and we love it. We'll see more Tundras around here, but we think it's going to be great.”

That sentiment is echoed by Frank Cortez, finance and insurance manager at Vara Chevrolet, whose motto is “When you come to Vara, you've come to the Heart of Texas.” Says Cortez: “People at Toyota and the other companies (suppliers) are going to spread around their dollars, and that will trickle down to the local merchants like J.C. Penney and McDonald's. It's possible they'll come in and give us some business.”

Vara sells 1,000 Silverados annually, says Cortez, adding that Chevy has attributes Tundra won't match in the early going, including special derivatives and more spacious interiors. “I welcome them all — Toyota, Nissan, whoever. They can't match our Silverado.”

Gone Fishin'

A spring rain falls, creating puddles on unpaved Watson Road, which forms one boundry of Toyota Motor Corp.'s new pickup plant site, set to launch production in 2006.

A man and his son are fishing nearby in the Medina River, a narrow stream that flows under the road. They are driving a white '01 Toyota Tacoma pickup, one of a fleet of eight trucks operated by E.L.T. Tree Service.

E.L.T. stands for “Every Little Tree,” and the 48-year-old company is owned by Elton Waters, 65. His son Larry, 35, is playing hooky with his dad.

Both are well aware that their stream may be tough to fish when the huge Toyota plant gets up and running. “I'm just waiting to get me a Tundra from that plant,” Elton drawls as his son nods in agreement.

The smaller Tacoma “has been a good work truck,” says Elton, and he expects the same from the Tundra. But he can't complain about his current fleet that, except for the Tacoma, includes a mix of Chevy, Ford and GMC nameplates. “I've got a '79 Chevy dually with over 350,000 miles (563,255 km) on it,” Elton boasts. Chimes in Larry: “I drive a Ford Ranger with 160,000 miles (257,488 km), and it just won't die.”

But that may not be enough. Toyota's coming to town, and soon “E.L.T.” may stand for “Elton's Large Tundra.”
— DCS