Toyota Motor Corp. (TM, 7203.TO) will invest $360 million to
expand a Kentucky factory to built for the first time ever a
Lexus-brand car in the U.S., solidifying its bet on a rebounding
American economy at a time when exchange rate volatility has taken
a bite out of its profits.
The Lexus ES 350, currently the brand's best-selling sedan in
the U.S., will be produced at the auto maker's Georgetown, Ky.,
factory starting in late 2015, Toyota disclosed on Friday. Japan's
largest auto maker will receive $146.5 million in state tax
incentives for the expanded production. The move will create 750
new jobs and churn out 50,000 ES sedans annually at the site.
"It is fitting that the first country to build the ES outside
Japan is the U.S. because it is home for Lexus," said Akio Toyoda,
the company's president, said during a live webcast in New York
Friday.
The shift in production is partly symbolic for the company,
which had once taken great pride in building all its luxury
Lexus-brand vehicles in Japan. Toyota has committed to building
three million vehicles a year in Japan.
The ES 350 sedan is currently built at a Toyota plant in Kyushu,
Japan, for export to the U.S., Middle East and Asia. None of those
sedans are sold in Japan, nor does Toyota plan to send any of the
U.S.-built ones back to its home country. Kyushu is expected to
build a future small Lexus SUV as ES production winds down.
Toyota executives said the decision to move Lexus ES 350
production to the U.S. was raised two years ago, when an earthquake
hit Japan, crippling plants and creating shortages of many key
models.
The move also comes as Toyota seeks to further streamline its
manufacturing operations worldwide and cut costs by assembling more
of its cars closer to where it sells them.
The company, like many other Japanese auto makers, has been hit
hard by the yen's rising strength against the dollar, a trend
that's made it difficult to make a profit on cars that are built in
Japan and then sold in the U.S. In response, Toyota has cut
production at its factories in Japan, leaving many of them
underutilized.
Even though the Japanese government has taken actions to weaken
the yen, Toyota isn't taking any chances.
"We aren't going to be swayed by short-term factors," Mr. Toyoda
said through a translator. The company wants to "make our
production as resilient as possible to currencies."
Last year, the company said it would move production of its
hybrid Toyota Highlander sport-utility vehicle to the U.S. from
Japan. Additionally, it is spending about $2 billion to expand
factories in Mississippi, Indiana, West Virginia and Canada. It
already makes the Lexus RX 350 sport-utility vehicle at its factory
Cambridge, Ontario.
Toyota's North American President Jim Lentz said the U.S. is
becoming a bigger export hub for the company with overseas
shipments from its factories here up 45% last year and poised to
grow even more this year.
Aside from China, the U.S. remains one of the world's largest
and most lucrative markets. It's also a fast-expanding one, which
is crucial for Lexus as it seeks sell 500,000 vehicles worldwide
this year, a figure closer to its pre-recession sales of 518,000 in
2007.
"Shifting production to Kentucky signals that Toyota is willing
to break tradition to gain a stronger foothold in the U.S. and
could hint that additional Lexus nameplates could be produced in
the U.S. later down the road," said Alec Gutierrez, a senior
analyst for auto research firm Kelley Blue Book.
The Kentucky plant, which first opened in 1986, currently builds
the Camry, Camry Hybrid, Avalon, Avalon Hybrid and Venza. Once the
Lexus ES is added, it will have the ability to assemble more than
550,000 vehicles a year.
Toyota, however, isn't the only one setting its sights on
expanding U.S. factory output.
Nissan Motor Co. (NSANY, 7201.TO) is considering a new plant in
North America to make vehicles for its high-end premium brand,
likely starting in 2017.
Honda Motor Co. (HMC, 7267.TO), which has seven plants in North
America, expects it will export more vehicles from the U.S. than it
imports from Japan within the next two years.
--Yoshio Takahashi contributed to this article.
Write to Christina Rogers at christina.rogers@wsj.com and Joan
Solsman at joan.solsman@dowjones.com
Order free Annual Report for Toyota Motor Corporation
Visit http://djnewswires.ar.wilink.com/?link=TM or call
1-888-301-0513
Subscribe to WSJ: http://online.wsj.com?mod=djnwires