Toyota to invest $1B in Mexico to build Corollas – Detroit Free Press
Toyota said today it plans to spend $1 billion to build a new plant in Guanajuato in central Mexico where it will make its next-generation Corolla — a move that underscores the automotive industry’s move to invest heavily in Mexico to build new auto plants in recent years.
Japan’s No. 1 automaker also said it will end production of the Corolla at its plant in Cambridge, Ontario, and will replace the Corolla with another passenger car as it makes its first major investment since 1997.
The new plant in Mexico will employ about 2,000 workers and will have an annual production capacity of about 200,000 cars. It also is the automaker’s first new plant in three years.
Production of the new Corolla is expected to begin in 2019. Toyota also will continue to produce the Corolla at its plant in Blue Springs, Miss.
In recent years, Mexico has been landing thousands of new auto jobs and billions in new investments from the automotive industry. Automakers are picking Mexico over Canada, the Midwest and the South with a lower labor costs, a mature supply base and access to transportation that makes it easy to export vehicles.
“We’ve been building Tacomas in Mexico for 12 years plus…and we are moving (Corolla) to a country that we know, that we have had great success in,” said Jim Lentz, CEO of Toyota North America. “Obviously the secret is out that this is a good place to be.”
On Friday, Ford is expected to announce a $2.5 billion investment in Mexico to build new engines and transmissions as part of a drive to increase fuel efficiency across its product portfolio.
Not counting Toyota and Ford, six other automakers have already announced plans to invest a total of more than $6.8 billion in Mexico between 2013 and 2015, according to Free Press research.
In general, Mexico is the country of choice for automakers to produce compact and subcompact cars, said Mike Jackson, director of IHS Automotive’s North American vehicle production forecasting.
“Manufacturers are constantly looking to evaluate where they can be most cost-effective,” Jackson said. “Clearly in the past…it has become more expensive to produce (in Canada), and for a lower margin offering, that becomes a constraint.”
Jackson projects that automotive production in Mexico will increase from 3.2 million cars and trucks in 2014 to 5 million by 2020.
Lentz said Toyota is by no means pulling out of Canada. He said the Cambridge plant will eventually gain “a yet to be named higher value midsize car.”
He declined to name the model or say how much Toyota will invest at the Cambridge plant.
Lentz said Toyota is realigning its North American production into clusters so that it makes mostly SUVS and crossovers in Ontario, SUVS and large cars in the Midwest and pickups and smaller cars in the South and Mexico.
The Woodstock, Ontario plant will continue to manufacture the RAV4 crossover while the Cambridge South Plant will continue to build the Lexus RX 350 and 450h.
Lentz said Mexico’s lower labor costs and the Canadian labor group Unifor’s effort to organize Toyota’s Ontario plants were not the deciding factors behind the decision to build the new plant in Mexico.
“It is merely shifting the manufacturing footprint and concentrating the midsize higher value product to the north,” Lentz said. “We have had great success in Canada. It’s a great plant.”
The decision to build a plant in Mexico also is designed to make Toyota’s cars and trucks more attractive to Mexicans.
“Mexico is an important market for us,” Lentz said. “The No. 1 selling vehicle in Mexico is the Corolla.”
Toyota’s new plant in Mexico will be Toyota’s 15th in North America, its first since 2011 and its largest investment in Mexico to date. Toyota also operates a plant in Baja California, Mexico, where it produces the Tacoma pickup.
Contact Brent Snavely: 313-222-6512 or firstname.lastname@example.org. Follow him on Twitter @BrentSnavely.