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The Shrinking Toyota

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By Milligram46
July 11, 2008

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Kind of complicated but this is the gist of it:

1) The one billion dollar factory that Toyota was suppose to start building in Mississippi, which was delayed in May of 2008, has been canceled. That factory was going to build Toyota Highlander midsize SUVs. (I'm telling you guys, either collectively the entire auto industries are idiots, or they were truly caught by surprise). The announcement to build this factory was made in February 2007. CLEARLY, Toyota's plan to beat General Motors in North American sales was to out build them in trucks. One bit of irony, is yesterday while getting ready for work I saw a business development ad for the state of Mississippi, highlighting that this Toyota factory was being built there. Ouch! (I have visions of the movie Gung Ho in my head)

2) Toyota Sequoia production at their Princeton, Indiana factory has been suspended for three months and may possibly not restart at the end of that shut down (read on). The Highlander production will be moved to the Princeton assembly line instead of the new factory that was planned in Mississippi.

3) Toyota Tundra production has been suspended in San Antonio for three months. Tundra sales are down 54% year over year, making the new 2008 model release of the Tundra a complete and total disaster. Production will be scaled back and the Tundra and Sequoia will be built at the same factory. The Tundra is also suffering from low quality, with even Consumer Reports giving the GMT900 based Chevrolet Silverado its top picks for most reliable full size pickup truck. General Motors was the only US based company to get a category "best in class" nod for quality.

4) All impacted employees will receive full pay and benefits during the shut down (welcome to the American auto industry Toyota).

5) Toyota will start building the Prius at a plant in the United States (along with production in Japan) and hopes to have a factory up and running by 2010 (again, the entire auto industry is incredibly dumb, or they didn't see this coming). Prius sales were down 34% last month because the production run for the model year is basically sold out. This means buyers will have to go to Honda, Nissan, Ford or General Motors between now and September/early October when the 2009 models start to show up.

The only reason this isn't gloom and doom for Toyota is they are sitting on a scary huge pile of cash and have massive amounts of equity, but like Detroit three, their product mix, when you really look, is SUV and truck heavy, their infrastructure investments in the last five years have all been around SUV and trucks, and just like Detroit product planners they are going, "what happened!"