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Toyota chooses US again in age of 'America first'

New joint-venture factory cements nation's status as second home for Japanese automaker

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This Toyota plant in Huntsville, Alabama, is one of the Japanese automaker's four vehicle assembly factories in the U.S.   © Reuters

NAGOYA -- Toyota Motor will build its first new U.S. car factory in a decade with partner Mazda Motor, adding to the top Japanese automaker's commitment to its most important market.

Announced Friday, the $1.6 billion plant -- whose cost will be split evenly by the companies -- is slated for completion in 2021. Plans call for creating up to 4,000 new jobs and producing the Corolla for Toyota and sport utility vehicles for Mazda, with a total annual output capacity of some 300,000 units.

In terms of production, the new plant will rank behind Toyota's Kentucky and Indiana factories in the U.S. The former manufactured 500,000-plus units last year, including the Camry sedan, while the latter built more than 400,000 Highlander SUVs and other vehicles. Assuming that Toyota products account for half of the new plant's output, the automaker's total U.S. production would rise to around 1.5 million units.

Under pressure

When the new plant opens, Toyota will have been making autos in the U.S. for nearly four decades. Its first American factory, the landmark New United Motor Manufacturing Inc. joint venture with General Motors in California, opened in 1984. Three years earlier, Toyota and other Japanese automakers had begun voluntarily curbing vehicle exports to the U.S. amid a trade dispute between Washington and Tokyo. Toyota eventually made the jump to local production.

Trade friction would play a role in later Toyota decisions to add to its American capacity. The automaker completed the Indiana factory -- its second wholly owned U.S. auto plant -- in 1999, four years after Japanese automakers promised to expand American production. When its latest plant opened in Mississippi in 2011, the total came to four. Production at NUMMI ended in 2010.

Toyota had originally chosen Mexico for building the Corollas that will now be assembled at the new joint venture with Mazda. Those plans earned a rebuke from U.S. President Donald Trump, who tweeted, "NO WAY! Build plant in U.S. or pay big border tax." While Toyota President Akio Toyoda said Trump's comment had nothing to do with the decision to build a new U.S. factory, the automaker was clearly under American pressure.

Rising U.S. production has helped lift Toyota's overseas output to more than 60% of its total. Of the 9.07 million units made by Toyota worldwide last fiscal year, just 3.18 million were built in Japan. Domestic production was eclipsed relatively recently, in fiscal 2007.

Once the new plant is completed, Toyota will have eight vehicle assembly plants in North America -- five in the U.S., two in Mexico and one in Canada -- making the region home to more Toyota capacity than anywhere but Japan.

Shifting to trucks

One of the Mexican plants, scheduled to begin production in 2019, is now supposed to make Tacoma pickup trucks for the U.S. market instead of Corollas. Low gasoline prices have renewed Americans' love for big autos like the Tacoma. Large vehicles accounted for about 60% of U.S. new-auto sales in 2016, up from less than half in 2013.

With sedan sales slowing, Toyota's Mexican production decision seeks to adapt to this change in the U.S. market. The company has ramped up output of another big model, the RAV4 SUV. But "we haven't been able to keep up even though we're running at full capacity, so we're missing an opportunity," a senior executive lamented.

That said, the U.S. market may be heading toward a turning point. New-vehicle sales fell on the year for a seventh straight month in July, with a 2.5% decline in large models.

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