States Feel Toyota’s Growing U.S. Success Via New Plant Investments

The time was a few decades ago when Toyota and its Japanese auto-making brethren would add a huge new assembly plant in some state and then cross their fingers to count its two U.S. senators as an additional pair of dependable political allies in the foreign carmakers’ fight against American import quotas.

Fast forward to today, when Toyota North America not only is long past such worries but is, in fact, one of the major engines of the continental economy. With 10 manufacturing plants in the U.S. directly employing more than 36,700 people, it already has assembled more than 38 million cars and trucks in North America over the last 60 years. And last year, Toyota sold 2.4 million cars and trucks in America through its 1,500 dealerships.

Not only that, but Toyota recently made one of the biggest commitments of any automaker to further economic development in the United States,  boosting its previous commitment by 22 percent, to invest $13 billion over five years ending in 2022 and sprinkling it into capacity increases, new vehicles, factory overhauls and employee training in several states.

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“We’ve become part of the American cultural fabric over that time,” Jim Lentz, CEO of Dallas-based Toyota North America, told Chief Executive.
“We’ve developed a tremendous value chain and have invested about $26 billion here so far. We build in the U.S. about half of what we sell here.”

Though Lentz remains concerned about how Donald Trump’s multi-theater trade conflict will work out for his company, right now there’s no better poster child than Toyota for President Trump’s made-in-America drive.

At the same time, Toyota’s economic-development achievements have been great for a number of states individually, including Texas, where it consolidated its white-collar corporate staff from around the country a couple of years ago; Kentucky, where Toyota’s original major assembly facility in the United States is its largest operation globally and is doing something that once was unthinkable within Toyota – building its Lexus luxury vehicles; Alabama, where Toyota and Mazda are jointly building a new assembly plant; and Indiana, where the company is building the crucial new version of its Highander SUV, among other vehicles.

“Our plants are big anchors in almost every community in which they operate,” Lentz noted. “Not only providing commerce and a strong tax base but, through our dealers as well as our manufacturing folks, really giving back to their communities.” Among other things, Toyota lends experts in its vaunted Toyota Production System to local non-profits to help them streamline organization and administration.

“There are two big reasons for how we’ve changed and why we’re doing what we are doing in the U.S. now,” Lentz explained. “One is that it’s really about being a stronger competitor on cost and a global basis.” The other is that the company has been making long-term decisions about where to site production as it converts its existing manufacturing capacity to the Toyota New Global Architecture (TNGA), which calls for making ever-better vehicles on common platforms with common parts.

The fact that Toyota in the U.S. can participate so fully in rolling out TNGA is a testament to what the company’s American operations have accomplished over time. For example, Lentz explained, sales of the company’s RAV4 SUV are “red hot globally, so there’s the need for more assembly capacity somewhere. The fact that we’re competitive in terms of what we can do in the U.S. and can raise our hand here and say, ‘Look, if you need more capacity for RAV4, we can do it here’ – that’s why now we can get that investment [in Kentucky]. We’ve matured over time.”

Also contributing to Toyota’s rising investment in the States are the strong shift in American consumer demand toward SUVs, crossovers and pickup trucks and away from traditional sedans. It only makes sense for Toyota to invest in building in North America the types of vehicles that are redefining the U.S. market and that appeal to American buyers more than to any others in the world at this point.

An additional driver of Toyota’s U.S. investment is its rising investments in its research centers in this country in artificial intelligence and other aspects of autonomous driving.

Lentz counts trade tensions and Trump’s jawboning about U.S. manufacturing as a relatively minor factor in the company’s decisions about factory investment.

“Political parties come and go,” he said. “You can’t make $13 billion in investments based on where they are today.”