The outlook for the US auto industry is thorny at best. Ford Motor Company plans to lay off 25,000 to 30,000 workers and close 16 plants in North America by the end of 2008, by which time General Motors will have laid off 25,000 employees and closed 12 plants.

By contrast, in autumn 2006, Toyota opened its 10th North American assembly plant, in San Antonio, Texas, to build the Tundra pickup. The facility marks the Japanese automaker’s entry into the US truck market. The Center for Automotive Research (CAR), based in Ann Arbor, Michigan, estimates that once fully operational, the San Antonio plant will generate about 9,000 jobs and $460m in annual wages for Texas.


Toyota is also adding a new production line, which will provide 1000 jobs to a Subaru facility in Indiana, and it began production in October 2006 on the Camry hybrid, to be built at its Kentucky plant (a hybrid uses both petrol and electric power). The hybrid production represents a $10m investment, to build about 48,000 vehicles a year (the plant has the capacity to build 500,000 annually). A new North American research and development complex is in the works in Ann Arbor, on a site described as being roughly six times the size of Disneyland.

Made in the USA

Jim Press, president of Toyota North America, says: “Having key manufacturing plants in eight states, and one each in Canada and Mexico, means nearly three out of five vehicles we sell here are made in North America.”

Toyota already employs 32,000 Americans directly – more than General Mills, Texas Instruments or Cisco Systems. “And with our dealers and suppliers, we create another 177,000 direct jobs,” Mr Press says. Add to that other spin-off employment, and CAR estimates that Toyota’s $13.4bn investment in its US operations was responsible for nearly 400,000 jobs and $14.4bn in wages in 2003, figures that compare roughly to those for a city the size of Miami, says Mr Press. This excludes the $28bn in parts, materials and services that Toyota purchases annually from 400 suppliers in 35 states.

Thriving market

Although US auto giants Ford and GM are having a challenging time in North America, Mr Press maintains the auto industry in the US is alive, well and growing: “As America’s population approaches 300 million, the future is full of promise.”

The figures speak for themselves. In October 2006, Toyota announced its best ever sales: 189,011, an increase of 13.6% on October 2005; calendar year-to-date sales totalled 2.1 million units, up 12.2% over the same period in 2005. The gains, the company says, come from the strength of new products, which are breathing new life into the US automotive industry. Today, the Camry is the top-selling passenger car in the US; the Lexus the top-selling luxury line; and the Prius the top petrol/electric hybrid. The Corolla compact sedan, now in its ninth generation, is the world’s best-selling passenger car of all time.

The industry is going through a major transition. US manufacturers face challenges based on globalisation and are restructuring and redeploying their resources to meet the needs of markets all around the world.

“Last year, for the first time in its long history, General Motors sold more vehicles outside the US than it did in America,” Mr Press says. “And we’ll see more of that in the future. It’s the way of life in the 21st century.”

All the major companies are looking for creative ways to meet the challenges of increasing competitive pressures and the escalating costs of developing new technologies. One way, Mr Press says, is through alliances with other global players. Toyota and GM have worked together for more than two decades, sharing operations at the only auto plant on the west coast and doing joint research on advanced technology. “I can’t speculate on what will happen if GM and Nissan come together, but it does illustrate just how tough and expensive it is to compete on a global basis as well as the constant need for efficiency in operations,” he adds.

In the US, international automakers such as Toyota, Honda and BMW are building new plants and adding jobs to the economy. In fact, such companies have contributed to almost all the growth in the US motor vehicle industry for the past decade, according to a 2005 CAR study.

Industry analysts project a boom in annual sales of 20 million vehicles, three million higher than current levels. “This is within reach during the next decade,” Mr Press maintains. “The whole industry will benefit from the rising tide.”

Population surge

The reason: the fast-growing US population, which is expected to increase by 70 million during the next two decades. In addition, people are living and driving for longer. In fact, CNW Research found that seven vehicles – more than half of the 13 cars the average American buys over a lifetime – are purchased after the head of a household turns 50. Sixty percent of the US population will be 50 or older in the next five years, and Baby Boomers won’t reach the peak of their spending power until 2009. Generation X is moving into its prime income earning years, and Generation Y, the second largest generation of all time, is starting to flex its spending power.

“This period has all the makings of a new ‘Golden Era’ for the auto industry – a time of prosperity for auto companies to develop new designs, technology and safety measures that will excite people, save lives and help cars live more in harmony with the earth,” he says.

Toyota alone is spending an average of $22.7m a day on R&D to develop more fuel-efficient, environmentally friendly automobiles. Currently, the company sells five types of Toyota or Lexus hybrids, and early next year will offer a sixth, the world’s first V-8 hybrid: its flagship Lexus LS sedan.

“In total, we’ve sold more than 351,000 hybrids in the US,” Mr Press reports. “In fact, we’ve sold more so far this year than Cadillac, Buick, or Mercedes Benz.” He believes hybrids are the technology of the future and will play a starring role in the 21st century: “We know they are absolutely essential to the future success of this industry.”

The company is not alone in this view: Honda and Ford also offer hybrid models and plan to add more. Nearly every other automaker, from Hyundai to Porsche, will also soon introduce hybrids.

Other innovations will result in the retooling of production lines and an expansion of the industry. For example, Toyota is considering the introduction of a flexible fuel vehicle programme in the US similar to the one it is developing in ethanol-rich Brazil; ‘plug-in’ hybrid vehicles that can travel greater distances without using their petrol engines are also in the works.

“Both projects will help to solve some of the key issues facing society, as well as encouraging other automakers to keep moving forward,” Mr Press says.

Toyota is moving fast to obtain a stronghold in Europe. Today the company has eight manufacturing facilities throughout Europe in the UK, France, Poland, the Czech Republic and Turkey.

Toyota Motor Manufacturing France has been producing the Yaris model from its assembly plant in Valenciennes since 2001. In late 2002, it increased production capacity from 150,000 to 180,000 units per year, and in November 2005, began assembly of the second-generation Yaris. “Toyota chose Valenciennes to be in close proximity to our final customers,” says Nicolas Fayol, spokesman for Toyota Motor Manufacturing France.

Buying power

The company’s immediate market encompasses a population of 10 million with a purchasing power three to four times higher than the rest of Europe. Valenciennes is also a highly competitive industrial region. “There are many suppliers here due to our history,” says Mr Fayol.

Northern France is well served by railroads, highways, and the Dutch and Belgian seaports of Rotterdam, Antwerp and Dunkerque. “Outbound shipments of finished products usually transit Dunkerque because of its good prices,” Mr Fayol explains.

The Valenciennes plant has also introduced a new concept in manufacturing. For starters, the 140,000 square metre facility was designed to be compact and adhere to an environmentally friendly policy of using less energy. The plant also works under a Toyota Production System that aims to eliminate all forms of waste and unevenness in the production process.

The system is based on both process standardisation and the Japanese Kaizen (continuous improvement) approach. Included in that is just-in-time production, which entails supplying the exact quantity of parts and components required, and the ability for each team member to stop the production line as soon as an error occurs. And from May 2004, the factory became Toyota’s first to operate with three shifts.

“This is completely unknown at Toyota,” says Mr Fayol.