Toyota Shelves Plans for US Prius Production
By Chris Haak
With Reporting by Jason Lu
Toyota is now changing plans for its under-construction assembly plant in Tupelo, Mississippi again. As we reported this past July, Toyota had originally intended to build Highlander crossovers there, but with the price of oil going through the roof, the SUV market cratered. No problem, said Toyota – we’ll build the Prius there instead. In July, with gas at $4 per gallon, Toyota couldn’t build enough Priuses to come close to demand for fuel efficient transportation, and before the tooling and equipment for the interior of the plant had been ordered.
With Prius sales also taking a dive, and Toyota suddenly finding itself with a nearly-completed plant but no need for it (the plant is 90% complete), it has decided to put the plans for Prius assembly on hold indefinitely. According to Toyota, the current plan is to build the Prius in the plant eventually, but perhaps not for a while. The plan is to complete the rest of the plant’s construction and then, when the need for the plant is imminent, order the equipment that turn a nice, empty building into a vehicle assembly plant.
Gas prices are hovering at a dollar and a half in many areas and sales of hybrids like the Prius have waned. In fact, sales of the Prius for November 2008 were roughly half that of those in November 2007, (8,660 vs. 16,737 respectively). Officials were then forced to ponder, “To build or not to build, that is the question. Whether ‘tis nobler in the mind to suffer the slings and arrows of the credit crunch, or to take arms against a sea of American short-term memory…and continue building the Prius.” Of course, the drop in sales isn’t all due to lower gas prices, but also the tightening credit availability as well.
The move is part of Toyota’s reaction to the collapsing US new vehicle market and the decision was likely done in an effort to try to preserve profitability this year and in 2009 in the face of unneeded capacity. Why should Toyota expend the money for the plant’s equipment right now if it won’t need the plant for a while, especially when it’s rumored that Toyota won’t earn a profit this year?
Complicating things slightly for Toyota is the fact that suppliers who will build components for the vehicles to be assembled at the new plant have begun (with Toyota’s encouragement, no doubt) to spring up in the area. With Prius assembly not originally scheduled to begin until late 2010, the suppliers setting up shop in the area may have had an opportunity to either slow down their own march to production or shift to other products, then truck them to vehicle assembly plants elsewhere.
This all just shows that even the mighty Toyota is not immune from the ills of a global recession, but the company has been fairly fortunate to have not completed the inside of the Tupelo plant, so that plans can be changed much more easily. As to what the specific timetable is for eventual Prius production in the US, Toyota’s answer is “Wakarimasen,” which is Japanese for “I’m not sure.”
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