Toyota Delays Mississippi Plant Launch; Slashes Forecast, Details Cost Cuts Next weekBy Michelle Krebs December 15, 2008
Toyota Motor Corp. said Monday it is delaying plans to open its newest U.S. plant in Mississippi, which was to have built the next-generation Prius hybrid.
Citing the steep decline in the auto market, Toyota said it would complete construction of the building but would hold off on installing equipment, delaying the start of production that was slated for 2010.
The delay of the Mississippi plant is part of a massive cost cutting the Japanese automaker has undertaken. Next week, Toyota is expected to slash its 2009 sales forecast by at least 1 million vehicles and outline plans to cut costs at its year-end news conference December 22, Reuters news service reports.
"Due to the uncertainty of the market, it is impossible to say at this time when production will begin (in Mississippi)," said Toytoa, which saw U.S. sales tumble 34 percent in November compared with a year earlier and its net profit plummet 69 percent for the fiscal second quarter.
Less than two weeks ago, Toyota opened a new Canadian plant in Ontario that will begin producing RAV-4 crossovers, adding to its capacity in North America.
Even Lower Forecast
Before Toyota adjust its sales forecast for the year even lower next week, the automaker lowered its forecasts in August even before the automotive market plummeted and the credit markets seized following the failure of Lehman Brothers in September.
Japanese media have estimated Toyota's group-wide global vehicle sales for 2009 at between 8 million and 8.7 million units, down from the record 9.37 million in 2007 and far from the company's most recent forecast of 9.7 million units.
In the first 10 months of 2008 the group, which includes Japan mini-car maker Daihatsu Motor Co. and truck manufacturer Hino Motors Ltd., sold 7.74 million vehicles, down 0.9 percent.
In an effort to bolster U.S. sales, Toyota took the unprecedented step of offering zero-percent financing on its newest models. Still, like its domestic and import counterparts, Toyota's sales fell by double digits.
Even its Prius hybrid, which once had long waiting lists of hopeful buyers, is in the doldrums, with sales of 48 percent in November. In response, Toyota is offering a bargain lease deal on the Prius in the San Francisco market -- $2,999 up front and $249 a month on a base price of $23,375, according to Edmunds' Green Car Advisor.
In addition, Toyota has closed plants, with another wave of production counts announced just last week, to prevent inventory buildup. In November, Toyota built a third fewer vehicles in North America than a year before. Still, Toyota's inventories are at about a 92 days supply, when 60 days is considered ideal.
"We think further production cuts are unavoidable and believe Japanese-branded carmakers should prepare for a deep retrenchment in demand," JPMorgan analyst Kohei Takahashi wrote in a report cited by Reuters.
The Japanese media Toyota is preparing to report a loss of about 100 billion yen ($1.11 billion) for the October to March quarter. Toyota, however, denies the reports.
The automaker is scrambling to cut costs in an effort to meet its new operating profit forecast of $6.6 billion in the year to March 2009 -- down 1 trillion yen from initial forecasts. The automaker formed an emergency committee headed by President Katsuaki Watanbe to improve earnings through deeper cost cuts.
So far, temporary workers in Japan have been furloughed, new factory and product launches have been delayed and executive bonuses have been cut. Analysts predict Toyota could reduce its annual dividend.
Photo by Toyota
Toyota has delayed the opening of its Mississippi plant where the next-generation Prius was to be built. It will still be produced in Japan.