December 17, 2008

Toyota Halts Construction On US Prius Plant

In response to the “steep decline” in US industrywide auto sales and the yen’s continued appreciation, Japanese carmaker Toyota is suspending completion of its newest plant near Tupelo, Mississippi (via Reuters).

The facility, which would be Toyota’s eighth assembly plant in North America, was originally supposed to produce Highlander SUVs but was quickly shifted to Prius production in July amid rising gas prices that pushed up sales of gasoline-electric models.

At some point over the summer, when gas prices were topping $4.50 a gallon, Southern Californian dealers could sell a Prius for $3,000 to $5,000 over sticker price - but those days are long gone. November sales of the hybrid model (8,660 units) fell by nearly half (48.8 percent) compared to Nov. ‘07.

Year-to-date, however, Prius sales are down 9.6 percent vs. the 16.3 percent decline in light-vehicle sales overall.

Toyota has so far poured $300 million into the Mississippi plant’s construction, which is 90% complete. The building will be finished, but installation of the metal-stamping machines, robotics, and other expensive equipment for car assembly is postponed indefinitely, the LA Times reports.

The 100 people hired to oversee construction and install human resources plans at the plant will not lose their jobs but will be assigned other duties, a spokesman told The New York Times.

Though slightly better than the auto industry’s 37 percent drop, Toyota’s sales were down 34% in November compared to the year-earlier period.

To crunch down further, Toyota plans to postpone large capital investments, eliminate executive bonuses, and has suspended its plan to increase production capacity in Brazil and India. It will also freeze plans to increase annual production capacity at one of its factories in China by 50% to 150,000 units by the end of 2009, according to Japan’s Nikkei business daily (via Industry Week).

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