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

[WASHINGTON] Alabama will be the site of a new US$1.6 billion Toyota Motor and Mazda Motor car plant, a victory for US President Donald Trump who had prodded manufacturers to build new US facilities and threatened tariffs on foreign production, sources said on Tuesday.

The plant, which will employ up to 4,000 people and produce about 300,000 vehicles a year, will be located in Huntsville, Alabama, and is a boon for the state, where Toyota has a large engine plant and an existing network of automotive suppliers.

A formal announcement by company and state officials is expected on Wednesday in Montgomery, sources briefed on the matter said.

The new plant - in a state Mr Trump won by 28 points in 2016 - could be a political boost to the Republican president, who has urged carmakers to build plants in the United States and add jobs. The companies said they expect the plant to open in 2021.

Mr Trump tweeted in March he wanted "new plants to be built here for cars sold here". The White House did not immediately comment on Tuesday.

The announcement also comes at a time of declining US car industry sales, so it could exacerbate overcapacity and add pressure to cut prices. US new vehicle sales fell 2 per cent in 2017, after hitting an all-time record high in 2016, and are expected to fall further in 2018.

Details of an anticipated tax and incentive package for the investment were not yet known. It has been reported the companies sought at least US$1 billion in incentives.

A Toyota spokesman declined to comment, except to say an announcement was expected soon. A Mazda spokeswoman also declined to comment.

In recent months, the companies had narrowed their choices down to sites in Alabama and North Carolina.

Local media last month said the leading site under consideration was in northern Alabama's Limestone County, near Toyota's large engine plant in Huntsville. In September Toyota announced a US$106 million technology upgrade for the Huntsville plant.

A Chamber of Commerce of Huntsville website for the"Huntsville Mega Site" touts the fact it has been "certified as development-ready". The commerce chamber, local and state officials declined to comment on Tuesday on plans for the plant.

A year ago, President-elect Trump criticised Toyota and threatened hefty tariffs against the Japanese carmaker if it built its Corolla sedan for the US market in Mexico.

"Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for US. NO WAY! Build plant in US or pay big border tax," Mr Trump posted on Twitter in early 2017.

Toyota and Mazda announced 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. Mazda plans to build new crossover SUVs (sport utility vehicles) at the plant.

Mr Trump praised the joint venture announcement, saying in August on Twitter: "Toyota & Mazda to build a new $1.6B plant here in the USA. and create 4K new American jobs. A great investment in American manufacturing!"

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.

Toyota has 10 US plants in eight states in an arc running from West Virginia through Kentucky, Indiana, Alabama, Mississippi and Texas.

Toyota and Mazda announced a capital alliance in August and are exploring joint development of technologies for the basic structure of competitive electric vehicles.

Over the last 30 years Toyota, along with German and Asian carmakers, has built a second car industry in the United States, rivaling the operations of the Detroit Three carmakers in size and employment, but with newer, and fewer unionized, plants.

States covet car assembly plants because they typically pay above-average wages and spin off jobs at suppliers and service companies. Southern US states have the advantage of good transportation infrastructure, business-friendly regulators and generally anti-union politicians.

The Alabama Department of Commerce shows 150 of the large car suppliers operate in the state, providing the logistical strength that Kristin Dziczek, a researcher at the Center for Automotive Research in Michigan, said helped land the plant.

Mr Dziczek said that Alabama in 2017 was tied for fifth among US states in auto production, at 9 per cent with Tennessee. It was behind Michigan at 19 per cent; Indiana at 12 per cent, Kentucky at 11 per cent; and Ohio at 10 per cent.

"The impact of an auto assembly plant extends beyond its immediate economic impact, and that's why states offer robust incentives," said Dennis Cuneo, a site-selection consultant and former Toyota executive.

"It creates a halo effect that in turn helps attract other projects."

Alabama spent an estimated US$250 million to woo Daimler AG's Mercedes-Benz to put a car plant in Tuscaloosa two decades ago.

REUTERS