Global Insight Perspective | |
Significance | Toyota has announced the location of its eighth U.S. assembly plant, in a small rural community in northern Mississippi. The plant will manufacture the Toyota Highlander CUV starting in 2010, as well as an as-yet-unnamed crossover still underdevelopment. |
Implications | Toyota needs the additional capacity to keep up with demand, as it wants to reduce the ratio of imports to locally manufactured vehicles. The site in question may pose difficulties, however, as much of the skilled workforce in the American South has been tapped out from recent plant construction. |
Outlook | One factor working in Toyota's favour is the displacement of people by Hurricane Katrina over a year ago, throwing many more unemployed workers into the potential pool of new recruits. If Toyota can become a part of the efforts to rebuild much of the devastated area, it can further ingrain itself into the public landscape. |
As reported yesterday (see United States: 27 February 2007: Toyota to Build New SUV Plant in U.S.—Report), Toyota is planning on building a new manufacturing facility in the American South to build Highlander CUVs and an as-yet-unnamed model that will share a similar platform. The automaker officially announced its plans yesterday, stating that the plant is expected to be online and operational by 2010, and will feature assembly, stamping, welding, and plastics operations.
Toyota has chosen Blue Springs (Mississippi) as the site for the plant, a fairly remote location in the deep south roughly 100 miles south-east of Memphis (Tennessee) and 15 miles north-west of Tupelo (Mississippi), a small town of just 34,000 residents best known for being the birthplace of musician Elvis Presley. The plant itself will have two phases, encompass roughly 17,000 acres, and cost a total of US$1.3 billion to construct. The first phase will employ 2,100 people and is slated to build the Toyota Highlander crossover-utility vehicle (CUV), a mid-size crossover based on the Avalon platform that is currently imported from Japan, by 2010. The second phase will open later and build an as-yet-unspecified CUV currently under development.
Outlook and Implications
Speculation has been rife for months about where and when Toyota would announce its next manufacturing site (see NAFTA: 30 January 2007: Toyota Growth Outpaces U.S. Capacity, But When Will the Expansion Come?). As recently as a month ago, Toyota North America president Jim Press stated that an eighth plant would be likely, as well as a ninth and possibly even more, due to increasing demand for Toyotas in the United States and the company's desire to manufacture the majority of sales in the NAFTA region. What is somewhat unusual is the site for which the new plant has been chosen. Automakers in the American South have been struggling for some time now to find workers skilled enough to be employed at many of the local plants, with anecdotes coming from one automaker that speak of selecting only two candidates out of an application field of over 400 at one open house. Turnover has also been a particular problem, as Nissan found when it opened its own Mississippi manufacturing facility, as the pace of auto manufacturing tends to surprise workers used to slower assembly lines for other products. Toyota expects to tap into the pool of unemployed furniture workers who have lost jobs to Chinese competition in recent years, but the company may find that it is drawing applicants from an already seriously depleted pool of resources.
But there is one element thrown into the mix over the last two years that may work in Toyota's favour: Hurricane Katrina. The aftermath of the catastrophic storm that devastated a huge swath of the Gulf States region over a year ago led to massive residential displacement, as over 500,000 people fled the coastal regions and headed inland. That demographic change, the largest displacement of people since the American Civil War, has been accompanied by extremely slow rebuilding efforts and a dearth of jobs in the region. By coming in now, over a year after Katrina and the chaos caused by it, the environment may just be right for Toyota to capitalise on the goodwill generated by making such an enormous investment in the state, as well as a larger than normal pool of available applicants. Skill level will still be an issue, however, as Mississippi has one of the lowest education rankings in the country. The relative proximity to Memphis, however may help in that regard.