Toyota resumes expansion with new Mexico, China plants

By Reuters

Apr 15, 2015 07:03 PM EDT

Toyota Motor Corp said on Wednesday it will build new factories in Mexico andChina, ending a self-imposed expansion freeze and putting more pressure on global rivals.

The world's largest automaker by sales volume said it would build a $1 billion plant with an annual capacity of 200,000 cars in the central Mexican state of Guanajuato, increasing its overall North American production capacity by about the same number of vehicles.

That plant, Toyota's first passenger car plant in Mexico, would have about 2,000 workers, the company said.

The highly anticipated announcement comes amid a flurry of new auto investments in Mexico, as carmakers are drawn to its low labor costs, free trade agreements and proximity to the United States.

Since the beginning of Mexican President Enrique Pena Nieto's administration in December 2012, auto investments have reached over $20 billion dollars, Mexico's Economy Minister Ildefonso Guajardo said at Toyota's announcement in Mexico City on Wednesday.

The new Mexico plant will be the first built from the ground up under the Toyota New Global Architecture strategy, the automaker's new approach to engineering and building vehicles, Jim Lentz, head of Toyota's North American operations, said in an interview on Wednesday.

Toyota said investment for the Guanajuato plant would likely be about 40 percent less than comparable investments in 2008. The Guanajuato site will be a model for other factories globally, Lentz said.

Toyota plans to move production of its Corolla compact car to the new Mexican plant in 2019 from a factory in Cambridge, Ontario.

The Canadian plant will get a new product, Lentz said, as part of a realignment of Toyota's North American manufacturing that will concentrate production of low-margin, small cars inMexico and at a Mississippi factory currently building the Corolla.

Toyota plants in Canada and the central United States will focus on larger, expensive cars and sport utilities. Pickup truck production will remain in Texas and Mexico, Lentz said.

In China, Toyota said it would spend about 52.5 billion yen ($440 million) to add a new facility and a third line at its factory in Guangzhou, owned jointly with Guangzhou Automobile Group Co Ltd. The line could start production in 2017 with capacity to make about 100,000 cars a year.

Wednesday's moves officially end Toyota President Akio Toyoda's three-year moratorium on capacity expansion, and increase pressure on the automaker's rivals, including Volkswagen AG and Detroit automakers General Motors Co and Ford Motor Co.

Toyota's sales took a hit during the 2007-09 recession and a 2010 recall scandal. Toyota says it is now using about 90 percent of its total manufacturing capacity compared with about 70 percent in 2009.

With the new Mexican plant, Lentz said: "We've expanded as much as we need to at this point."

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