Toyota Motor Corp., battling the same headwinds that are creating a crisis in Detroit, demonstrated its leading-edge flexibility yesterday with a series of actions that will boost production of the environmentally friendly Prius.
The U.S. housing collapse and soaring gas prices have hammered sales of Toyota's pickup trucks and sport utility vehicles, so the auto maker will slash production of those gas guzzlers and dedicate a new assembly plant in Mississippi as the first North American production site for one of its hottest gas misers, the hybrid Prius.
Toyota's moves go beyond what Chrysler LLC, Ford Motor Co. and General Motors Corp. have done as sales of their most profitable vehicles plunged, said Michael Robinet, vice-president of global vehicle forecasts at consulting firm CSM Worldwide Inc. in Northville, Mich.
"To this point we've heard of either [production] cuts or increases in shifts from the Detroit Three," Mr. Robinet said. "But Toyota has outlined actually shifting product. They're actually making structural shifts to continue to adapt to the changing marketplace."
Those shifts take advantage of Toyota's ability to build several models off different platforms - or basic vehicle underbodies - on the same assembly line. That flexibility is built into the auto maker's plants from the ground up and is surpassed only by Honda Motor Co. Ltd.
Jim Schmidt, a director at the manufacturing research group Harbour Consulting Inc., said Toyota has some of the most flexible plants in the industry and should be able to convert them without major investments such as new robots or paint shops.
"That's why when you see Toyota announce something like this, they can do it relatively quickly," Mr. Schmidt said.
The Detroit Three are racing to catch up to Toyota and Honda after generations of assembly plants that churned out 250,000 copies of a single vehicle each year, which made them extremely vulnerable to sudden shifts in the market.
That sudden shift has happened and hit the pickup truck and SUV market the Detroit Three have depended upon for profits for more than a decade.
As those three companies did, Toyota misread demand for full-sized pickups and dedicated an entire plant to pickup production but will now move swiftly to adjust.
Toyota will cut production of pickups, closing its dedicated Tundra pickup plant in San Antonio, Tex., for three months and halting output of pickups as well as full-sized Sequoia SUVs for three months in Princeton, Ind.
But it will also start building its hit hybrid Prius for the first time in North America in 2010. The Prius will be assembled at a plant Toyota is building in Mississippi that was originally slated to build the Highlander crossover utility vehicle.
The Princeton plant will be retooled to build Highlander. Sequoia production will be shifted to the Texas plant, which will also become the home of all large pickup truck production.
Toyota spent $1.2-billion (U.S.) to build its assembly plant in San Antonio and make it capable of cranking out 300,000 Tundras a year.
But the swift change in the market has forced all auto makers to adjust. Nissan Motor Co. Ltd., another Japan-based auto maker that built a southern U.S. pickup truck plant that took aim at the heart of Detroit's profits, has now effectively abandoned the segment by signing a deal with Chrysler, which will slap a Nissan nameplate on some of the pickups it makes.
Beyond the downturn, however, there's another problem in the pickup segment for Toyota and that's the strong loyalty U.S. owners have to their Dodge Rams, Ford F-series and Chevrolet Silverados.
That's one key reason why the Japan-based auto maker built its pickup plant in Texas - to win over some Texans with a home-made truck in the biggest pickup market in North America.
Tundra sales plunged 53 per cent last month in the U.S. market and slid 8 per cent in the first six months of 2008 from year-earlier levels.
Sales of Prius also tumbled, but that was caused by a different problem - a shortage of supply because the car was in such high demand.
Those slumps helped pull Toyota's overall sales down 21 per cent in June.
TOYOTA (TM)
Close: $92.60, up $1.12
Prius sales drop
Toyota Prius sales fell nearly 34 per cent in June compared with last year, as the company fights to meet demand.
June, 2007: 17,756
June, 2008: 11,765
THE GLOBE AND MAIL
SOURCE: ASSOCIATED PRESS
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