Toyota: Potential Mexico plant far from approval

Craig Trudell
Bloomberg News

Toyota Motor Corp., the last major carmaker without a high-volume assembly plant in Mexico, said the group assessing whether to build a factory there is far from getting clearance from top management.

“There is a team studying it, but I’ll be honest with you, it’s still far from being an approved project,” Steve St. Angelo, head of Toyota’s Latin American operations, told reporters Wednesday in Tokyo.

Low labor costs and favorable trade accords with the U.S. and some Latin American countries are luring more foreign auto producers to Mexico. Kia Motors Corp., BMW AG and a Daimler AG-Nissan Motor Co. venture each announced $1 billion-plus factories since June, highlighting the lack of a comparable plant for Toyota City, Japan-based Toyota.

President Akio Toyoda has stressed the need for the world’s largest automaker to exhaust all measures to boost output with existing factories. The grandson of the company’s founder is showing restraint after overexpansion contributed to a 2009 fiscal year loss and recalls of more than 10 million vehicles for unintended acceleration.

“Akio is very firm on us about growing in a sustainable way,” St. Angelo said. “He doesn’t want us to go through another recession and have to shut down plants.”

Toyota factories in Latin America have heeded the calls by Toyoda and are operating at more than 100 percent capacity utilization by using Saturday shifts, St. Angelo said.

In Brazil, St. Angelo said he’s pushing the Indaiatuba plant making the Corolla and Sorocaba factory producing the Etios small car to each manufacture as many as 85,000 vehicles a year, exceeding their official capacity of about 70,000 units.

An option to squeeze more production from existing plants would be to transition them to three-shift operations rather than two. Toyota’s Tacoma pickup plant near Tijuana, Mexico, will become the first North American assembly factory to move to such an arrangement in April. That facility has been the company’s smallest in North America.

Toyota eventually could decide to move to three shifts at other plants in North America or in Latin America depending on the Tacoma plant’s performance, St. Angelo said.

“Toyota has not had much experience with three shifts, so they wanted to test it out and see if it’s really good for Toyota or not,” St. Angelo said. “This could open up an opportunity for some plants to do three shifts where it makes sense.”