Toyota Considers Michigan As Site for New Engine Plant
By NORIHIKO SHIROUZU
Staff Reporter of THE WALL STREET JOURNAL
January 7, 2006; Page A2
In a symbolic move in part aimed at defusing a possible backlash against its growing success in the U.S., Toyota Motor Corp. has put Michigan among the top potential sites for a new engine plant that would create hundreds of jobs at a time when General Motors Corp. and Ford Motor Co. are cutting their work forces in North America.
A senior Toyota executive said southwestern Michigan has emerged as "one of the most promising candidates" as a place to make engines and possibly transmissions to be used in Toyota vehicles produced in the nearby Canadian province of Ontario, as well as in northern California. Previously, Toyota executives hadn't specified where they would like to put the plant, other than to say Michigan hadn't been excluded from the list.
The official and other executives said Toyota is considering areas around Kalamazoo and Battle Creek in part because southwestern Michigan is deemed more or less free of the influence of the United Auto Workers union. That would allow the Japanese auto maker to set up a nonunion plant just like most of the seven major manufacturing plants it operates in North America, except for one in northern California, which is run jointly with GM.
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The executives said Takeshi Uchiyamada, the executive vice president and chief of global manufacturing operations, is expected to visit Michigan this month to inspect a couple of sites being considered.
The new engine plant would become Toyota's third in the U.S. -- it has an engine plant in Alabama and a facility in West Virginia that makes engines and transmissions -- and would help alleviate an anticipated shortage of four-cylinder engines for vehicles built in North America. But it also is designed to portray Toyota as a big contributor to the U.S. economy. Michigan, meanwhile, is bracing for further bumps in its economy thanks to plant closures and deep job cuts being planned by GM, Ford and their component suppliers.
Some Toyota executives, worried about political backlash against the company, believe that making a symbolic gesture of goodwill by setting up a plant and creating hundreds of jobs in Michigan could be critical as Toyota is poised to displace GM as the world's biggest producer of automobiles as early as this year.
The company has built plants across North America for years to blur its status as a Japanese auto maker -- a strategy Toyota began stressing in the mid-1990s in the wake of a bitter war over auto trade between Washington and Tokyo.
Toyota has gained political clout among the congressional representatives from states where it employs thousands of Americans. State governors also vie to land investment by the Japanese auto maker. A typical Toyota assembly plant calls for an investment of about $1 billion and eventually creates 4,000 to 5,000 jobs.
The emergence of Michigan as a potential site follows persistent courting by Michigan Gov. Jennifer Granholm. According to Toyota executives familiar with the auto maker's talks with Ms. Granholm, the governor made two trips to New York in the autumn last year to meet with Harry Otaka, a top Toyota executive in North America, and executives from Toyota's North American manufacturing operations.
In those meetings in a conference room of the Toyota office in New York overlooking Central Park, the executives said the Michigan governor pleaded with Toyota to open a plant in Michigan to ease the brunt of economic pains caused by GM and Ford's slumping business. Ms. Granholm, according to the same executives, pitched Michigan as a place where Toyota could set up a non-union plant depending on where it sites the plant, and asked Toyota not to look at Michigan in a stereotypical way that characterizes the state as a union-dominated place hostile to a company like Toyota.
In a recent interview with the Wall Street Journal, the governor stressed Michigan is just as competitive as southern U.S. states like Alabama and Mississippi that have been successful in attracting an array of Japanese and Korean auto makers and suppliers. "Their pitch is they are non-union. But Michigan has both union and non-union shops… and we have got equally aggressive economic incentives to make the case for Toyota."
The governor's spokeswoman, Liz Boyd, confirmed Ms. Granholm made two trips to New York last fall to meet with Toyota executives but declined to elaborate. "Governor Granholm believes if Toyota builds a new engine facility [in North America], they should build it in Michigan. We have the most skilled workforce in the world and we are the automotive R&D capital in North America. We will continue to make that case to Toyota and to the world," the spokeswoman said.
The executives said Southwestern Michigan offers a highly advantageous location for Toyota to produce engines because its most acute need for four-cylinder engines lies in Woodstock, Ontario, where Toyota is slated to begin production of the small, recently redesigned car-based Rav4 sport-utility truck in 2008. The plant is expected to have capacity to produce 100,000 vehicles a year.
New United Motor Manufacturing Inc., an assembly plant operated jointly by Toyota and GM in Fremont, Calif., also needs locally built engines to push up North American component content of the Tacoma pickup and make the truck "more American" as part of the effort to help minimize the chances of political trouble. Currently, all four-cylinder and V6 engines used in Tacoma trucks are brought in from Japan.
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