Toyota, Mazda to build US$1.6b plant in Huntsville, Alabama

Montgomery, Alabama

TOYOTA Motor Corp and Mazda Motor Corp said on Wednesday they will build a US$1.6 billion joint assembly plant in Alabama that will employ up to 4,000 workers, a boost for President Donald Trump, who wants carmakers to expand US production.

Toyota president Akio Toyoda and Mazda chief executive officer Masamichi Kogai joined Alabama governor Kay Ivey in Montgomery at an event to announce the decision.

"Welcome to sweet home Alabama," Mr Ivey said to the two executives, after saying the anticipated 4,000 workers at the plant to be built in Huntsville would earn an average of US$50,000 a year. The plant will produce 300,000 vehicles a year and should open on a 1,000ha former cotton field in 2021, about 22km from Toyota's engine plant in Huntsville. Toyota plans to build Corolla cars at the plant, while Mazda will build crossover SUVs.

Alabama will provide tax incentives. Officials said the state tax incentives were worth US$370 million, but they did not disclose how much the local incentives were worth.

But with US car industry sales declining, the new plant could exacerbate overcapacity and add pressure to cut prices.

US new vehicle sales fell 2 per cent in 2017, after hitting a record high in 2016, and are expected to fall further in 2018.

Huntsville mayor Tommy Battle said the plant will "provide jobs for decades to come for Huntsville and Alabama. It vaults Alabama to the top as an industry leader in producing the next generation of cars that will power our nation". Among US states, Alabama is already the fifth largest producer of cars and light trucks. The state has more than 150 major car suppliers and 57,000 automotive manufacturing jobs.

Two decades ago, Alabama spent an estimated US$250 million to woo Daimler AG's Mercedes-Benz to put a plant in Tuscaloosa, sparking the birth of car production in the state.

In September, Daimler said it would invest US$1 billion to expand its Alabama Mercedes-Benz plant to start building electric sport-utility vehicles there from about 2020.

Alabama is also home to assembly plants operated by Honda Motor Co and Hyundai Motor Co. A Kia Motors Corp assembly plant operates near the Alabama border in Georgia.

Mazda and Toyota said they still need approvals and authorisation by antitrust agencies for the new joint venture.

They announced a capital alliance in August and plan to jointly develop technology for electric vehicles.

Mr Trump tweeted in March that he wanted "new plants to be built here for cars sold here". Many carmakers have announced expansions of facilities or new jobs but no other new US car plants have been announced.

A year ago, shortly before his inauguration, Mr Trump criticised Toyota and threatened hefty tariffs against the Japanese carmaker if it built its Corolla sedan for the US market in Mexico.

In announcing plans for a new plant in August, Toyota said it would shift production of Corollas from Canada to the new venture rather than in Guanajuato and would build Tacoma pickups in Mexico instead.

Toyota North America chief executive Jim Lentz said in an interview on Wednesday that pressure from Mr Trump was not a factor in the decision to build the plant. "These plants are going to live 30, 50 years plus and we have to make good business decisions," he said.

Mr Lentz said it makes sense to build Corollas because Toyota needs the volume even in a declining car market. He called the US$800 million investment a "bargain" to get the additional volume.

Toyota hopes to break ground this spring after initially getting more than 100 proposed sites from 22 states.

In October, Toyota said it would scale back investment in a planned plant in Mexico by 30 per cent to US$700 million and cut planned annual capacity in half to 100,000 vehicles as it shuffles its production plans to meet market demands.

Over the last 30 years Toyota and other carmakers from Germany and other parts of Asia have built a second car industry in the US. Its size and employment rival operations of the Detroit Three carmakers, but with newer plants and fewer unionised workers.

US states covet car assembly plants because they typically pay above-average wages and spin off jobs at suppliers and service companies. Southern states have been home to the majority of new car production by German and Asian carmakers.

These states generally have good transportation infrastructure, business-friendly regulators and anti-union politicians. REUTERS