Toyota decides to restart Mississippi auto plant

Published 1:48 pm Friday, June 18, 2010

Toyota will resume construction of a plant in Mississippi, hiring 2,000 workers with the goal of building compact Corolla sedans by the fall of 2011, the Japanese automaker said Thursday.

The plant in Blue Springs, Miss., has been on hold since late 2008, when Toyota suspended construction as the economy fell apart and sales of new cars and trucks collapsed in the U.S.

The move signals that the automaker is preparing for a sales rebound and looking to move past a recall crisis that sullied its reputation for safety.

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Toyota’s U.S. sales have lagged rivals in recent months, even with heavy promotions. The decision to finish the Mississippi plant also comes just weeks after the company sold off a shuttered factory in California, which itself used to build Corollas.

“You’re basically moving Corollas from California to Mississippi. It’s a bit of zero-sum game here,” said Erich Merkle, president of the consulting company in Grand Rapids, Michigan.

The company has been working to patch up its reputation and win some goodwill in the U.S. following its recalls of more than 8 million vehicles worldwide over reports of unintended acceleration across numerous models.

U.S. authorities slapped Toyota with a record $16.4 million fine for acting too slowly on the recalls. Toyota dealers have so far installed fixes on millions of vehicles, but the automaker still faces more than 200 lawsuits tied to accidents, the resale value of Toyota vehicles and the drop in the company’s stock.

Toyota also drew fire when it closed down a 25-year-old plant in Fremont, Calif., called New United Motor Manufacturing Inc. The plant, also called Nummi, was a joint venture with General Motors Co. that employed 4,700.

But GM pulled out of the project after it filed for bankruptcy protection last summer. Toyota said it could not afford to run the operation alone. Last month, it agreed to sell the plant to Tesla Motors Inc., a Silicon Valley startup that plans to build high-end electric cars at the site.

Toyota’s decision to build Corollas at Blue Springs, a nonunion facility, drew fire from the United Auto Workers union on Thursday.

UAW President Bob King told union members at the UAW national convention that Toyota transferred Corolla assembly from the union-covered Nummi plant to Mississippi “just to get lower wages and benefits.”

King, who was speaking in Detroit, called for more organizing campaigns at U.S. factories owned by Toyota and other foreign-based automakers. Currently, none of Toyota’s U.S. plants are unionized.

Thursday’s announcement that the Mississippi plant will build Corollas — the company’s No. 2 seller in the U.S., behind the Camry — marks yet another shift in plans. Initially, Toyota wanted to build Highlander SUVs there. But in mid 2008, as fuel prices soared above $4 a gallon and hybrid sales soared, Toyota said the plant would produce the Prius instead.

Merkle said the plant should be flexible enough to build both Corollas and Priuses if Toyota chooses to build both models there. The company said the Mississippi site will produce 150,000 Corollas a year.

Toyota sales are up 10.5 percent in the U.S. so far this year, according to Autodata Corp. By contrast, industrywide sales are up 17.2 percent. After its recalls, the company announced a slate of generous incentives designed to revive sales, including zero-percent financing across most models and two years of free maintenance. The promotions sent Toyota sales soaring in March and April, but sales last month lagged the industry.

The company returned to profitability for the fiscal year ending March 31 after racking up the worst loss in its history the previous year.