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Who – and what – do you believe?
The old rumor mill has been churning quite a bit the past few days about the plant. Reports of trucks rolling in and out of Toyota Motor Manufacturing Mississippi. Helicopters swooping down at the dead of night, delivering equipment.
The shutting down of the NUMMI plant in California on Thursday got the ball rolling for Toyota to get TMMMS open, supposedly.
The Corolla will be built here, so the whispers go. And if you’ll remember, a Japanese newspaper last summer reported that very same thing. It was quickly denied by Toyota.
But oh, yes, you’ve heard the same stories, too, haven’t you?
Like the “X-Files,” the truth is out there. Somewhere.
So when will Toyota open Blue Springs? Heck, I don’t know. But let’s look at why Toyota will open soon – and why it won’t be.
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Why it will open
It makes sense for plenty of reasons for Toyota to open TMMMS sooner rather than later.
The automaker has sunk more than $300 million of its own money into the project, which is expected to cost about $1.3 billion. The state has spent a couple of hundred million on infrastructure.
Walking away from the project would mean the company would have to repay all state and local money invested in the project.
The Corolla and the Prius, both built on the same platform, are among the best-selling vehicles in the U.S.
Plants in Canada and Japan can absorb Corolla production from NUMMI for the short term. Demand for the Prius still remains high, and Toyota’s plans to increase total hybrid vehicles sales to 1 million annually within a couple of years means capacity must come from somewhere.
Opening Blue Springs puts Toyota closer to engine suppliers in Alabama and West Virginia – much closer than California, Canada or Mexico.
Why Toyota won’t open soon
On the flip side, Toyota is in no position to open the plant anytime soon.
It’s received plenty of negative publicity from the recalls and from NUMMI closing.
Quality issues have been blamed on growing too quickly, something that company President Akio Toyoda has acknowledged. Opening a new plant won’t quiet the critics.
Besides, Toyota is, and has been, slowing production in several plants worldwide. That means over-capacity is an issue.
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So, consider the case for and against Toyota making a decision soon about Blue Springs, and form your own opinion.
Me? I’m still crossing my fingers.
Contact Business Editor Dennis Seid at (662) 678-1578 or dennis.seid@djournal.com.
I hope that wasn't more of our tax dollars being wasted!
My personal opinion is that they should not do any additional infrastructure projects with Toyota as the primary "justification" until Toyota provides a date for the opening of the plant.
But, our legislators seem dead set on a "road to nowhere". I guess they're trying to keep up with Alaska's "bridge to nowhere."
Seriously, I think that any additional road construction should stand on it's own. That is be needed and justified without considering Toyota's needs. If the need can be established without regard to Toyota's needs, then fine. But if the primary beneficiary of a project is to be the Toyota plant and the rest of us are only going to get marginal benefit from it, it should be put on hold until the date of the plant opening is announced.
Someone posted on a story here that some of the stuff in the bonds was approved 23-years ago. My feelings are that if we've done without them for 23 years, do we really need them? Especially given our state's economic condition right now.
I frequently travel the route from the Toyota plant through Blue Springs to Baldwyn and I don't see enough traffic on that route to justify a 4-lane project.
But that's just my opinion.
I think a bill has been passed that approves Hwy 9 South of the plant. I just hope they don't waste money on a "toyota road" to the North.
We need to make it MORE attractive to employ Americans and build American plants not LESS and Obamacare makes it detrimental to companys' bottom lines to locate/increase their presence here.
As for the recalls, I disagree with you there. These issues seem to be due to design flaws not manufacturing.
In fact the gas pedal assembly installed in some Camrys that are built in a US plant, are not part of the problem, while the Japanese built pedal assemblies are, according to Toyota.
So, at least according to Toyota, it's not a manufacturing quality issue, but a design issue.
I believe that the sudden unintended acceleration issues will eventually be found to be due to an electronics/computer issue.
Of course Toyota continues to deny that it is electronic/computer related, probably because of the costs involved in redesigning and retrofitting such parts. Either that or they don't yet know how to fix it and they are stalling for time.
All this said, I don't see them opening the Blue Springs plant anytime soon if ever.
I can't recall any safety issues until Toyota started being built in the US with US workers. So I would have to ask myself: Do I continue US production with poorer track record in production/safety ? Do I subject myself to US Congress quizzing me when they have ruined their own country ? If demand is so high for my product, why not just keep it trickling in so I can keep prices higher and better profit margin (kinda like oil/gas industry does) ? What kinda money is it about to cost me to provide health insurance for these workers in the US when I can do much better elsewhere ?
Toyota would be smart to take the loss and run under these circumstances. Of course there is the National politics to consider. But is it worth it ?
The Plant Build/Start-Up Costs: If Toyota were to walk away today and pay the state back for the taxpayer money spent on infrastructure it's total expenditure would only be in the $500-600M range. Still well less than 50% of total project cost. When one figures in the plant start-up costs in addition to the capital costs, they'd probably be less than 33% into the total project costs if they walked away today.
The Demand/Production:
If there was enough demand for the Corolla/Prius, they probably wouldn't have pulled out of California as quickly as they are.
They have a Canadian plant that already builds the Corolla, and with decreased demand, it makes sense to move the Fremont, CA (NUMMI) Corolla production to that plant.
The majority of Prius's sold in the US are sold in the state of California. California is also on the ocean and thus closer to the source of the batteries for the Prius still made in Japan.
2010 Prius wait list times have dropped from 8 months at launch to 3 months and sales in the US have dropped 40% in the October 2009 to February 2010 time frame and Toyota has reduced the monthly production by 10% to 45,000/month in March 2010.
So, if there was adequate current demand for the Prius in the US to start building it here now, it would have made better sense to delay the NUMMI closing and/or build in the Cambridge, Canada plant until demand gets back to the levels to justify the new plant dedicated to the Prius.
As for proximity to the Alabama and West Virgina engine plants is concerned, the argument doesn't hold up.
The Alabama plant (TMMAL) manufactures V8 and V6 engines for Tundra and Tacoma pickup trucks and the Sequoia full-size sport utility vehicle.
So, none of the engines built there are used in either the Corolla or Prius. Thus, close proximity to this plant is irrelevant. The engines built at the Alabama plant are for the Tundra trucks built in San Antonio Texas (TMMTX) and the Tacoma trucks built in the Baja plant (TMMBC) and the Sequoia built in Indiana (TMMI).
The West Virgina plant (VTMMWV) manufactures 4-cylinder and V6 engines for operations in Indiana and Canada. The West Virginia plant also produces automatic transmissions and gears for plants in Kentucky, Indiana and Canada.
The Cambridge, Canada plant already manufacturers the Corolla and with decreased demand can immediately absorb the production from the NUMMI that is being shut down. The logistics are already in place for the West Virgina engines to ship to Canada as they already and will continue to build the Corolla in the Cambridge, Canada plant. And the West Virgina engine plant is a little closer to the Cambridge, Canada plant than it is to Blue Springs, MS.
Bottom line, demand is down significantly from where it was when the plant was initially announced and even from the time when the announcement was made that the plant would build the Prius instead of the Highlander.
Yes, Toyota recently announced a 40% increase in sales over last year. But keep in mind that is a 40% increase over a much lower number than when the plant and Prius build announcements were made, thus still not anywhere near the demand numbers that they based the building of the Blue Springs plant on.
So, couple these issues with those that are mentioned as reasons not to open the plant and it makes for a compelling story against opening the plant anytime soon, if ever.
There seems to be no logical reasons in favor of opening the plant.
As for the helicopters in the middle of the night and all that. I don't think that's true. I live less than a mile from the plant (less than .5 air mile) and have not heard any helicopter traffic in the middle of the night. Nor have I seen any higher than normal truck traffic, etc.
Other reasons against the plant opening any time soon:
-- Toyota's continued safety issues and their mishandling of them
-- Probably in a U-shaped recession where we're likely to remain at the bottom for a couple of years
-- Recent increase in demand for vehicles due to significant government and manufacturer financial programs that have to end at some point
-- Consistent nationwide unemployment rates of almost 10% (9.7% this month)
Doesn't bode well for the opening of the Blue Springs plant anytime soon.
But I hope I'm wrong.