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The Globe and Mail

Toyota considers moving Lexus production to U.S.

Toyota Motor Corp. is considering moving the production of some vehicles, such as the Lexus ES, to North America.

David Dewhurst

The strong yen in Japan is causing Toyota Motor Corp. to consider moving some production to the United States, said Jim Lentz, sales chief executive of Toyota's U.S. unit.

A likely candidate would be shifting production of the Lexus ES sedan from Japan to the U.S., Mr. Lentz said, adding the high cost of moving output would mean that Toyota would have to further monitor the market and the yen's strength before making a decision.

"With where the yen is today, I think it's only a matter of time" before Toyota moves more production to North America, to have assembly nearer to the U.S. market, he said.

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In addition to the strong yen, moving production is being driven by engineering capabilities in the U.S., including at its engineering center in Ann Arbor, Mich., that employs more than 1,100 engineers, Mr. Lentz said.

Speaking to reporters at an industry conference in Traverse City, Mich., Mr. Lentz said Toyota is going to maintain its forecast of 14.3 million for U.S. vehicle sales in 2012.

While Mexico is an option for more production, Toyota is more likely to send production to the U.S., Mr. Lentz said.

U.S. auto sales, which gained strength in the final quarter of 2011 and into early 2012, have stalled, Mr. Lentz said, largely because of a lack of consumer confidence in taking out car loans. He said once the U.S. presidential election is decided, retail sales will increase, regardless of which candidate wins because there will be more certainty on federal economic policy.

While the European financial crisis and weak auto sales may have an impact on U.S. consumers psychologically, Mr. Lentz does not think problems in Europe will hit U.S. auto sales significantly. Unlike in the downturn of 2008 and 2009, U.S. banks and credit will not be as greatly affected, he said.

With one of the lowest incentive levels in the industry, Toyota is considering adding incentives in the luxury market.

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