Bullish Signals From G.M. and Toyota
By NICK BUNKLEY
Published: June 17, 2010
DETROIT — Two of the world’s largest automakers signaled confidence in the economic recovery on Thursday, with Toyota announcing it would resume construction of a long-delayed plant in Mississippi and General Motors increasing output at most of its American operations.
Toyota said it would hire 2,000 workers to start building Corolla compact cars at its $1.3 billion plant in Blue Springs, Miss., by the fall of 2011. The plant was 90 percent complete when Toyota halted work on it 18 months ago amid slumping sales across the industry.
G.M. said nine of its 11 assembly plants in this country would skip the regular two-week summer shutdown, which was to start later this month. The plants will remain open to build 56,000 additional vehicles, particularly new models that have been in short supply at many dealerships, the company said.
Analysts said the two announcements reflected the growing optimism among carmakers that the worst was over for the auto industry. Over all, car sales in the United States fell 35 percent from 2007 to 2009, with 10.4 million vehicles sold last year compared with 16.1 million in 2007. But in the first five months this year, sales showed the start of a rebound, rising 17 percent.
“We have a long way to go,” said John Wolkonowicz, a senior auto analyst with the research company IHS Global Insight. “But the level in the lake is rising, and most manufacturers are going to rise with it. You’re going to see a lot more overtime and a lot of this standard vacation time not being taken.”
Toyota said its sales were improving both as a result of a strengthening economy and its efforts to overcome the damage done to its reputation by recalls of about nine million vehicles worldwide since November.
“We’re confident that we’re seeing things improving,” James E. Lentz, president of Toyota Motor Sales U.S.A., said on a conference call.
“We’re starting to see some bright spots in the economy,” Mr. Lentz added, but cautioned, “It’s not going to come roaring back.”
The Ford Motor Company’s chief market analyst, George Pipas, said Ford had already increased output to meet demand and still had two weeks of down time scheduled at its United States plants, though not all plants would shut down at the same time or in consecutive weeks.
Ford, whose sales are up 30 percent so far this year, previously said it was increasing production by 42 percent in the second quarter and 16 percent in the third quarter compared with levels a year earlier.
“The economy’s recovering, but almost every day we get mixed signals,” Mr. Pipas said. “It seems like the economy takes a couple steps forward and then a couple steps backward.”
The summer plant shutdown is a tradition among the Detroit automakers, which in past years used the down time to prepare assembly lines to make the next year’s models. Today the practice is more of a union-negotiated perk than a necessity; G.M. said its contract with the United Automobile Workers gave it the flexibility to cancel a companywide shutdown.
G.M. said it might need to use some temporary workers as it operated the assembly plants for the two extra weeks.
“Our manufacturing teams are taking creative approaches to increase production and reduce the wait times for our dealers and customers,” Mark I. Reuss, president of G.M. North America, said in a statement.
Toyota’s decision to assemble the Corolla in Mississippi means it no longer has any near-term plans to build Prius hybrid cars in North America.
Since mid-2008, Toyota had been saying it would make the Prius at the Mississippi plant when it opened, but demand for hybrids has fallen sharply as gas prices have ebbed. When it was announced in 2007, the plant was to build Highlander sport utility vehicles.
Mr. Lentz said Toyota had enough production capacity in Japan to meet demand for the Prius. Two years ago, many dealers had few Prius models, and some sold the car for thousands of dollars above sticker price. For 2010, Prius sales in the United States were down 31 percent through May compared with the same period of 2008.
“As soon as global supply falls short of global demand, I’m sure we’ll take a look at what we can do here in the U.S.,” he said. “Today what’s most important is that we bring North American production of the Corolla back.”
Toyota stopped building the Corolla in the United States in April, when it closed a plant in Fremont, Calif. That plant, known as New United Motor Manufacturing Inc., or Nummi, had been a joint venture with G.M. until it withdrew after filing for bankruptcy protection last year.
Toyota now plans to reopen the California plant in partnership with another automaker, Tesla, to build electric cars, but it will be a much smaller operation.
The plan to move production of the Corolla, one of Toyota’s top-selling vehicles, from the California plant, where workers were represented by the United Automobile Workers union, to the new Mississippi plant, where workers will not be represented by a union, drew harsh words on Thursday from the U.A.W.’s new president, Bob King.
“It’s outrageous. It’s a terrible business decision and clearly to us an anti-union decision,” Mr. King said at his first news conference since being elected on Wednesday. “They’re running away from decently paid workers to much lower wages in Mississippi.”
Mr. King, who this year joined picket lines against closing the California plant, said he would discuss the matter with the Obama administration.
Mr. King is fighting to ensure that Toyota and Tesla rehire U.A.W. workers, and the labor secretary, Hilda L. Solis, told delegates at the U.A.W. convention here that the laid-off workers should be given first priority for the new jobs.
More than 4,500 workers lost their jobs when the California plant, Toyota’s only unionized factory, closed.
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