Toyota invests US$791m in Texas as trade deal nears

New York

TOYOTA Motor Corp and one of its top suppliers will invest a combined US$791 million in Texas to build next-generation pickups as part of a drive to boost output in the US and ease trade tensions with the Trump administration.

The announcement that Toyota is plugging US$391 million into its San Antonio truck factory comes six months after the carmaker pledged to shell out an additional US$3 billion on its US operations by 2021, a move seen as an effort to head off threatened US tariffs on vehicles imported from Japan. That was on top of an earlier US$10 billion pledge Toyota made shortly before President Donald Trump took office.

"We view it as a tremendous vote of confidence in Texas and San Antonio and the truck market" in the US, Christopher Reynolds, the chief administrative officer and head of manufacturing for Toyota in North America, said in a Bloomberg Television interview.

The spending is part of Toyota's multi-decade production-localisation drive, but also reflects a strategy to convince Mr Trump not to follow through on tariffs of as much as 25 per cent on imported vehicles and parts. The Japanese carmaker has publicly pushed back on the administration's claim that foreign vehicle makers pose a national security risk to the US.

Following a months-long probe, the administration in May cleared the way for tariffs on imported cars and components. But the White House has put off imposing them while it pursues trade deals with Japan and the European Union.

President Trump on Monday said the US will reach an initial trade deal with Japan in the coming weeks, but made no mention of his threat of duties on US$50 billion worth of Japanese vehicles. Prime Minister Shinzo Abe's camp has warned that any final deal must include assurances that Washington won't hit the country's car sector with new duties.

Toyota said it's San Antonio announcement isn't linked to the trade talks between the US and Japan.

"We don't make these investment decisions based on what the current trade scenario is," Mr Reynolds said. "When we make this kind of investment, we're looking at where we think the market will be in 20 years from now, regardless of what the trade flows might be under this agreement or that agreement."

No new direct jobs were announced for the truck factory, which employs more than 3,000 workers. Toyota said the funds will be used to incorporate "various advanced technologies" on the production lines for the Tacoma and Tundra pickups.

But the carmaker said an affiliate of one of its close-knit suppliers, Aisin Seiki Co, will hire 900 workers for a new US$400 million vehicle-parts production facility in a San Antonio suburb. Toyota group companies own nearly 39 per cent of Aisin and its president is a former senior executive at the carmaker.

Toyota doesn't count investments made by group companies as part of its investment pledge to the US. But the carmaker's public policy team has showcased Japanese supplier investments on social media.

Toyota has had difficulty supplying dealers enough trucks to meet demand. The company also makes the Tacoma at a plant in Tijuana, Mexico, and plans to build the model at another plant that's under construction in Guanajuato.

The full-size Tundra is only made in San Antonio. Next year, it's expected to undergo its first full model change since 2007. Future iterations of both trucks will share a common underpinning platform, the trade publication Automotive News reported earlier this year.

The Tacoma has been the best-selling mid-size truck in the US for the past 14 years, but Toyota's lock on the segment is being challenged by rivals. General Motors Co launched a pair of mid-size pickups in 2014, and Ford Motor Co and Fiat Chrysler Automobiles NV have debuted competing models this year. BLOOMBERG