Toyota, Mazda said to jointly build US$1.6b US plant

[SOUTHFIELD, MICHIGAN] Toyota Motor Corp and Mazda Motor Corp are nearing a deal to buy stakes in one another and jointly build a US$1.6 billion US factory, according to people familiar with the matter.

The plant will have the capacity to produce 300,000 Toyota Corolla compact cars and Mazda crossovers per year, said the people, who asked not to be identified ahead of the companies making an official announcement Friday. The facility will create 4,000 jobs and be operational by 2021, the people said.

Toyota spokesman Ryo Sakai said in an e-mail that the board of directors will discuss a partnership with Mazda on Friday. He declined to comment on the possibility of a capital tie-up. Toyota reports its results after the market's close.

Mazda lacks any US factories, which exposes one of Japan's smallest carmakers to both trade and currency risk. President Donald Trump threatened to tax auto imports early in his presidency and specifically attacked Toyota's plan to open a Corolla plant in Mexico.

Shifting production of those cars from a plant in Canada enables Toyota to boost output of the RAV4 crossover. American consumers are buying that model in record numbers, while Mazda also is seeing booming demand for its entry in that segment, the CX-5.

Mr Trump's pressure to build more vehicles in the US may have affected the timing of Mazda's decision to start manufacturing cars in the US, as well as Toyota's decision to boost its presence, said John Shook, chief executive of the Lean Enterprise Institute in Cambridge, Massachusetts. But their close relationship has been in development for many years, he said.

"Mazda has been studying the Toyota Production System, with direct help from Toyota, since the 1970s," said Mr Shook, a former Toyota engineer.

"So this is an easy marriage for both parties."

EV Work

The deepening ties between Toyota and Mazda also are driven in part by the enormous costs automakers are facing to develop connected, self-driving and battery-powered vehicles. The two companies will do joint work together on electric-car technology so that they're able to introduce plug-in models once there's more demand for them in the US, the people said.

Toyota has sought to share the costs of developing new technologies - and spread the expense of building traditional vehicles - with a growing set of its Japanese peers in recent years. The company solidified a partnership with Suzuki Motor Corp in February and already sources compact cars from Mazda's lone North American assembly plant in Mexico. Until last year, Subaru Corp built the Camry for Toyota at a factory in Indiana.

"In Japan, there's a great tradition of Toyota being a 'big brother' to other smaller manufacturers," said Eric Noble, founder of The Carlab, an automotive consultancy in Orange, California.

Because of its strong dependence on North American market, Mazda absolutely needs to expand its manufacturing footprint here."

Toyota may purchase roughly a 5 per cent stake in Mazda, which will in turn invest in its Japanese peer, the Nikkei newspaper reported earlier, without saying where it got the information.

BLOOMBERG