Toyota Shifts Highlander Output to U.S. From Japan to Blunt Yen

Toyota Shifts Highlander Output to U.S. From Japan to Blunt
Toyota Motor Corp.'s Highlander sport utility vehicle. Photographer: Scott Eells/Bloomberg

Toyota Motor Corp., Asia’s biggest automaker, will end production of Highlander sport-utility vehicles in Japan, consolidating assembly of the model in Indiana to blunt the impact of the yen’s rise on earnings.

Toyota will invest $400 million to expand capacity at its Princeton, Indiana, plant that already makes the mid-size light truck to produce an additional 50,000 units annually, the company said yesterday. The move, which includes production of the gasoline-electric version of the SUV, will add 400 jobs at the factory, Toyota said.

“The trend throughout the industry for localization of production is irreversible,” said Efraim Levy, an analyst for S&P Capital IQ, who has a “hold” rating on Toyota’s American depositary receipts. “There’s clearly strong currency-related pressure on Japanese automakers.”

Toyota, Honda Motor Co. and Nissan Motor Co., all based in Japan, are shifting some auto production from their home country to counter the yen’s 6.9 percent rise against the U.S. dollar in the past year.

Toyota this week added a second shift at its Mississippi plant to cut Corolla imports from Japan; Nissan is spending $2 billion on a Mexican factory intended to be a base for auto exports; and Honda plans to make small cars in Mexico and its top-of-line Acura NSX supercar in Ohio.

Exports From Indiana

Highlanders will be exported from Indiana to markets including Russia and Australia after expansion of the plant is completed next year, instead of from Japan, the company said.

The project “allows for better utilization of the Indiana plant, and will help Toyota capitalize on the improving North American and global auto market,” Steve St. Angelo, Toyota’s executive vice president for North American engineering and manufacturing, said in a statement.

Toyota’s plant in Kyushu, Japan, will stop producing the model by late next year. Most Highlanders will be made in the U.S. with limited production of the SUV in China for sale only in that market, the automaker said.

The announcement is “great news for this region, for our American customers, and for the U.S economy because every auto job creates 3 1/2 ‘spin off’ jobs that support those workers,” Yoshimi Inaba, Toyota’s chief operating officer for North America, said yesterday at the Economic Club of Chicago lunch at the Chicago Auto Show.

Along with Highlander, the Toyota City, Japan-based company’s Princeton plant also builds Sequoia full-size SUVs and Sienna minivans. The Indiana factory employs 4,800 people, according to the statement. It has capacity to build 300,000 vehicles a year, according to the company’s website.

Toyota’s ADRs rose 1.8 percent to $81.05 yesterday in New York.

Is RX Next?

“There’s no doubt there’s more to come if the yen stays at the current level,” said Michael Robinet, an analyst with consultant IHS Automotive in Northville, Michigan. “Currency is the great equalizer.”

Toyota’s line of luxury Lexus RX crossovers, now built at both the Kyushu plant that makes Highlander and the company’s Cambridge, Ontario, plant, “is also on our radar” to be consolidated in North America, Inaba told reporters yesterday.

“Our exports of ‘made-in-America’ products to 21 countries have topped 100,000 vehicles, and we’ve just begun exporting American Camry sedans and Sienna minivans to South Korea,” Inaba said.

Exporting “usually stabilizes your production,” he said.

Toyota this week said net income for the quarter that ended Dec. 31 fell 14 percent to 80.9 billion yen ($1.05 billion), while revenue increased 4.1 percent to 4.87 trillion yen.

The company raised its net income forecast for its fiscal year that ends March 31 to 200 billion yen from 180 billion yen, due to improving sales in the U.S. and other regions.

Toyota said Feb. 3 its global sales, including those of subsidiaries Hino Motors Ltd. and Daihatsu Motor Co., will rise 21 percent to a record 9.58 million vehicles this year.

The automaker’s U.S. sales unit is in Torrance, California.

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