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Toyota ups investment by $3B in US plants for total of $13B

Toyota Motor Corp. upped its investment in U.S. operations to $13 billion, with nearly $750 million of that going toward production and jobs in five states, the Japanese automaker announced March 14.

The investment adds $3 billion to Toyota's 2017 pledge to invest $10 billion in the U.S. by 2021. The targeted investment period runs 2017-2021.

The automaker said the additional investment will add 586 jobs to manufacturing plants in Kentucky, Alabama, West Virginia, Missouri and Tennessee. This includes expanding engine capacity in Alabama, doubling hybrid transaxle parts capacity in West Virginia and adding vehicle castings in Tennessee and Missouri.

The RAV4 hybrid SUV, which Toyota unveiled at the Los Angeles Auto Show in November 2018, will be produced at the Georgetown, Ky., plant, along with the Lexus ES 300h hybrid car.

Toyota Motor North America CEO Jim Lentz said the Kentucky plant is one of Toyota's largest in the world and noted that up to this point, it had only been producing passenger cars.

"There was risk involved in that" as consumer preferences shift toward light trucks and SUVs, Lentz said on a March 14 conference call with reporters.

"Adding an SUV to that plant was important," the CEO said.

Toyota Motor North America Chief Administrative Officer Chris Reynolds, however, said not to expect a shift to all-SUV production at the Kentucky plant.

"We generally want to make sure our plants produce more than one type of vehicle ... in order to insulate them from some of the cycles in the market that might otherwise compel a slowdown of investments," Reynolds said on the call. "We just think it makes smart business sense to make different types of vehicles at a plant."

The executives declined to disclose how the rest of the $13 billion is being invested although they did note that they have already used about $5 billion of the amount on investments in plants.

Lentz said consumer preference, new platforms and investing in new technology drove the investment in these five plants, but the automaker is still thinking about the trade issues involving the U.S.

"I'd be disingenuous if I didn't say we also have an eye on trade," the CEO said, adding that the U.S.-Mexico-Canada Agreement is part of that, but the company is also awaiting the findings of a Section 232 investigation.

"Specifically on 232, we … are eager to understand the findings so that we can understand if we need to be making any changes in investment," Lentz said, referring to the U.S. Commerce Department's investigation into the imports of cars and auto parts on the basis of national security, which could result in tariffs.

Reynolds added that Toyota's overarching manufacturing principal is "if we can sell it here, we need to make it here."

"That's been true before any tariff uncertainty, it's true during tariff uncertainty, and it'll be true after," the chief administrative officer said.

Toyota's investment cycles go beyond political cycles, Reynolds said, adding that the automaker makes decisions based on what it thinks the market needs.

"Not necessarily what might be the policy direction at the moment, as you know those policy directions can change," Reynolds said.