Thursday, August 9, 2012

Toyota Considers Adding to U.S. Production

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Toyota Motor Corp. is considering shifting more production to North America from Japan to ease the impact of the rising yen, even after the Japanese auto maker posted strong quarterly earnings.

The company is studying the financial benefits of transferring production of a high volume vehicle—possibly the Lexus ES sedan—from Japan, Jim Lentz, Toyota's U.S. chief, said on the sidelines of an automotive conference on Wednesday.

"The ES is now built out of Japan, so that would be something we would look at," Mr. Lentz said about the second-highest volume vehicle in the Lexus lineup. "Everything is on the table."

Moving production out of Japan underscores the lengths to which Japanese auto makers are willing to go to escape the impact of the yen's strength against the dollar and the euro. A strong yen erodes the price competitiveness of Japanese-made products exported abroad causing some companies to lose money on vehicles they ship from the country.

Toyota announced two weeks ago plans to stop exporting the Lexus RX to North America from Japan, building all of the vehicles in North America. The company will invest $98.3 million to boost production capacity at its Cambridge, Ontario, plant as soon as 2014.

Honda Motor Co.  is already working to shift a major chunk of its manufacturing to North America over the next two years by increasing production capacity by as much as 40%.

Toyota's Georgetown, Ky., plant is a likely candidate if the auto maker were to move production to the U.S. The factory now produces the Camry, which shares the same underpinnings as the Lexus ES. Mr. Lentz declined to say whether the company would build a new factory in the U.S.

Separately, Mr. Lentz said Toyota's U.S. operations have fully recovered from last year's tsunami, which disrupted Toyota's supply chain in Japan. The company is back to an inventory of 300,000 vehicles, which it considers ideal. A year ago, inventory was about 120,000, causing shortages on dealer lots.

Last week, Toyota said its net profit for its April-June quarter increased to ¥290.3 billion ($3.71 billion) from ¥1.1 billion for the same period a year earlier.

Courtesy of The Wall Street Journal

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