Toyota Will Make Lexus ES 350 in Kentucky

Toyota has been eager to bolster its Lexus brand in the United States, the automaker’s biggest overseas market, where luxury car sales now outpace sales of other autos. Toyota also wants to shift more production from Japan to overseas markets to better insulate itself from the currency gyrations that have wreaked havoc with its bottom line in recent years.

For communities like Georgetown, Toyota’s decision to expand auto production came as a vote of confidence in American auto manufacturing after years of painful cutbacks by domestic automakers. Despite that decline, the United States remains one of the top auto manufacturers and employers in the world, thanks to Japanese and other foreign automakers that have expanded production here.

Those foreign automakers are getting plenty of incentives. On Wednesday, the Kentucky Economic Development Finance Authority approved $146.5 million in state tax benefits to help Toyota expand production in Georgetown, in a sign of how aggressively states are wooing companies that will create and maintain local manufacturing jobs.

“I feel like the state has just won the Kentucky Derby,” Gov. Steven Beshear of Kentucky said as cheers erupted in a broadcast streamed live in New York from Toyota’s Georgetown plant. The site is Toyota’s first wholly owned factory in the United States, and its largest manufacturing plant outside of Japan. “We actually see Toyota as a Kentucky company,” he said.

Toyota said that it would invest $360 million to install a new production line that will build about 50,000 of its flagship Lexus ES 350 sedans at Georgetown. The move will increase annual production at the plant, which already assembles the Camry, Avalon and Venza models and employs about 6,600 people, to about 550,000 vehicles a year.

“For manufacturing, Kentucky is Toyota’s home. It has some of the most experienced engineers in the world,” Akio Toyoda, president of Toyota Motor, said in New York. He said that building the Lexus here would help Toyota better meet the needs of its American customers, and would reduce the effect of the exchange rate on car prices for American consumers.

Since 2008, a punishingly strong yen has weighed on Toyota’s profitability, making it more expensive in dollar terms to produce in Japan and eroding the value of its overseas earnings in the home currency. Mr. Toyoda said a recent respite in the yen’s strength would not affect the company’s plans to protect itself from future ups and downs in currency.

Toyota’s new expansion follows brisk sales in the United States of the Lexus ES, a midsize luxury car that is selling twice as fast as it did in 2012. Though the car comes in conventional gasoline and gas-electric hybrid models, only gas-powered cars will be made in Kentucky for now, Toyota said.

Toyota currently builds the Lexus ES at a plant on the island of Kyushu in southern Japan. Seeking to soothe worries back home that Toyota is reducing manufacturing jobs there, Toyota said that it expected to announce soon that the plant would manufacture another model. The Kyushu plant will also make and export the hybrid version of the ES, Toyota said.

Toyota’s chief executive for North America, Jim Lentz, said the investment came on top of plans already under way to spend $2 billion to expand and upgrade Toyota factories in Indiana, Mississippi, West Virginia and Canada in the last two years. Those expansions have also created new jobs.

Traditionally tightly controlled from its headquarters in Toyota city, Toyota has revamped its management structure in recent months to give more authority to regional managers, including a new team of executives in North America led by Mr. Lentz. Mr. Lentz said bringing Lexus production to the United States was the first decision made by his team, and that he expected similar decisions to follow.

Article source: http://www.nytimes.com/2013/04/20/business/toyota-will-make-lexus-es-350-in-kentucky.html?partner=rss&emc=rss