Manufacturing Monday: The Prius to be made in America, VW expands too!


Call it a positive effect on the falling US Dollar.  Along with an increase activity by domestic manufacturers, foreign companies are now expanding their operations here in the US.  Now, yes I understand that ultimately the money goes back overseas, but they are hiring folks who needed jobs.  To me, that last part is what counts.

It's official, Toyota will make the Prius in the US!

In a big shuffling of operations, Toyota is establishing a manufacturing base in the United States to build their famous Prius.  The famed hybrid will be built in Blue Springs, Mississippi.  Various business news sources have long hinted that Japanese car makers have been hurting with the appreciation of the Yen versus the Dollar, including the rising cost of shipping only extends their financial pain.  Indeed, there was an interesting piece back in 2007, that stated that for 1 JPY move downward would hits Toyota for about $318 million.  Now I don't know if this is completely true or not, but I do remember my father's late best friend, an importer of Japanese electronics claiming that many companies were hedged around the 115 JPY level.  

DETROIT (AP) -- Toyota Motor Corp. will start producing the hybrid Prius in the U.S. for the first time as the Japanese automaker adjusts its U.S. manufacturing operations to meet customer demands for smaller, more fuel-efficient vehicles.

The company said Thursday it will start producing the Prius in late 2010 at a plant it is building in Blue Springs, Miss. Toyota already builds a hybrid version of the Camry sedan in Kentucky, but this will be the first time the Prius, which has been on sale for more than a decade, will be built outside of Japan and China.

- excerpt from "Toyota making US manufacturing changes", Associated Press

Toyota also will be temporarily suspending operations in it's Tundra models in Texas and Indiana due to declining demand.   This is obvious, given the rising price of gas.  One need only look at the current misfortune of the other car makers who essentially bet the farm on Sport Utility Vehicles, namely American auto makers!  During the shutdown, Toyota said, workers will be improvement projects.

"In our view, we don't just want to send everyone home because it makes for a bad startup condition when we start back in November," he said. "Beyond the investments we've made in buildings and equipment, we've invested a lot in our team members. It doesn't make sense for us to dismiss them."

Princeton plant spokeswoman Kelly Dillon said employees will be working on special safety and quality improvement projects during the shutdown.

- excerpt from "Toyota making US manufacturing changes", Associated Press

Now you may be wondering, why include the story of a shutdown with the introduction of new work?  Doesn't one cancel the other out?  Perhaps, but I doubt that Toyota is going to cut operations long term.  Indeed, if one looks at Japanese companies in general, they play chess while we've been playing checkers.  Something tells me, that these plants in question will be used to produce future hybrid vehicles.  Though oil is "down" right now, fuel prices in general have a longer bullish trend.  Toyota knows this, and that is why I think they are expanding hybrid car manufacturing here.

Volkswagen Choo-choo's Chattanooga

After months of wheeling and dealing, the Tennessee city of Chattanooga will be home to a brand new assembly plant by Volkswagen.  In a bit of historical irony, the location will be on the grounds of a former munitions plant that was built specifically for bombing Germany during WW2.  Today though, instead officials from both parties, from the governor on down were looking to drop incentives instead of bombs on the laps of the Germans.

Tennessee's top politicians usually wield their power in Washington, D.C., and Nashville and aren't above throwing a sharp elbow at the opposition.

But while courting Volkswagen to build an auto assembly plant in Chattanooga, Republican Sens. Bob Corker and Lamar Alexander and Democratic Gov. Phil Bredesen worked together in bipartisan fashion to help win over VW executives during cocktails and dinner at Mr. Corker's Riverview home.

After a venison dinner during one of three gatherings at Mr. Corker's Annehaven home last month, Sen. Alexander closed the evening at the piano, banging out the world-famous 1940s Glenn Miller tune, "Chattanooga Choo Choo."

- excerpt from "Chattanooga: 'Choo Choo' hit right note with Volkswagen", Times Free Press

Failing to attract others like Toyota and KIA, the area went out of its way in an almost fanatical fashion.  When Volkswagen reps said the area looked good but had a problem with the growth of trees and such, the local government hired almost every construction crew in the area who then worked on 18 hour a day basis to clear the area.  Of course there was the package of other incentives to help woo the Germans as well.  

"If there were any sort of touchy steps along the way, I think it was when we got through putting together all the incentive packages," Gov. Bredesen said. "I think it looked to them weak and difficult to understand compared to what the other states were doing. We had to do a lot of education."

The governor said he thinks the state's incentive package exceeded that offered in 2005 to convince Nissan to relocate its North American headquarters to Franklin, Tenn. That came to about $197 million. But the governor said costs for dealing with items such as infrastructure won't be known fully until later because they depend on the plant's design.

- excerpt from "Chattanooga: 'Choo Choo' hit right note with Volkswagen", Times Free Press

The company will build the facility in the Enterprise South Industrial Park, located 12 miles northeast of downtown Chattanooga. The 1,350-acre site is 100 percent owned by the city of Chattanooga and Hamilton County and is certified as an industrial megasite by the Tennessee Valley Authority. Enterprise South is adjacent to Interstate 75. Initial production capacity for the facility is anticipated to be 150,000 vehicles, including a new midsize sedan designed specifically for the North American market. Production is scheduled to begin in early 2011.

- excerpt from Volkswagen public release "Volkswagen Group of America announces it will produce cars in Chattanooga",

(Aerial photos courtesy of Chattanooga Chamber of Commerce)

So are these car companies the beginning of a new wave of foreign investment?  While I love seeing stories like this, in the back of my feeble brain thoughts of union representation lurk about.  We all know that in the South (and this is nothing personal against the region, mind you) that organized labor is not like that found in say Ohio or Illinois.  Right now it's automobiles, but will we eventually see consumer electronics and other goods?  It would be nice to know the next time I get a new television, that it was made using American labor.

But what's down the road?

All right, you know I was gonna throw a sour note into all this, so let me get this out of the way.  Going through all these news stories, the term incentives keeps popping up.  Today it is tax breaks and infrastructural development.  But what if the global economy or more to the point job prospects become more desperate?  Will local and state government offer a different set of incentives?  To many politicians, getting new jobs for voters equates to them keeping their jobs. But I can't help thinking that down the road, as competition heats up, that we run the risk of turning parts of the country into machiladoras.  For those who don't know, machiladoras were areas in Northern Mexico were companies went to setup factories, it was the source for Ross Perot's warnings of a "giant sucking sound" of jobs leaving America.  

Like I said, I'm happy to see work come back to this country.  I'm still somewhat of a capitalist, but I know how cut throat capitalism can me.  We need safeguards, that sounds bad to you free traders, but we do.  There are Americans who need work whose skills pertain more to factory work, which doesn't make them less, factory work can be intensive and shouldn't be put down.  Saying this, look at the trends were such work goes, into mainly anti-union regions.  Now I'm not saying the next President will be a Republican, but down the road we're gonna have 'em and they will do the evil that they do.  Globalization, an economic depress, or just plain competition, it doesn't really matter.  

In North Korea, they setup a special trade zone in which South Korean businesses can "hire and pay" northern workers.  The reality is, these folks are slaves.  There are similar, though not sure as bad, special zones all over Asia like in China.  How soon until, say some future state governor says they will have a "special zone"?  Think it's ludicrous?  C'mon, the past 8 years should have shown you anything is possible now.

Ok, sour note over, had to say it, forgive me.  Once gain, congrats to Blue Springs and Chattanooga on their big score.  Now lets make sure we bring more work and rebuild our manufacturing base!

Tags: cars, Economy, jobs, Labor, manufacturing, South, Unions, US Dollar (all tags)


11 Comments's Monday...booo! Tips jar

Thanks for taking the time to read my latest Manufacturing Monday post.  I's Monday, trust me, even one of my dogs don't look forward to it!


by johnny venom 2008-07-21 01:25AM | 0 recs
Just in time to hire all those folks... Spring Hill, TN, that are going to either be fired or laid off when Saturn either: a.) goes out of business, or, b.) gets sold off to some yet unknown entity.

by bobswern 2008-07-21 01:38AM | 0 recs
Re: Just in time to hire all those folks...

OMG, you're right.  Sad, but most likely true.

by johnny venom 2008-07-21 01:40AM | 0 recs
Re: Just in time to hire all those folks...

It is a shame, the early Saturns were awesome cars, and if they had concentrated on the kind of ingenuity that went into the first models (and the sporty feeling of the SC1 and SC2) I don't think we would be talking shutdown today.

by Sychotic1 2008-07-21 05:33AM | 0 recs
Always Hope in our Complex World

Good Diary, recced!

We just looked a Priuses and heard about the plants being retooled.  The falling dollar has even made China move their currency - silver linings and all of that.


by chrisblask 2008-07-21 03:58AM | 0 recs

great diary.

by canadian gal 2008-07-21 05:56AM | 0 recs
Great diary, rec'd

by SocialDem 2008-07-21 08:49AM | 0 recs
I just hope the quality doesn't die

as cars made in the US are notorious for poor quality. That is the reason Ford and GM don't do too well against Honda and Toyota.

by Lakrosse 2008-07-21 09:35AM | 0 recs
Re: Manufacturing Monday: Prius to be made in

Good to hear.

But if you want an American built hybrid, buy a Ford Escape or Mercury Mariner.

by LakersFan 2008-07-21 09:40AM | 0 recs
Re: The Prius to be made in the USA

   Too bad they aren't making them in CA which is the largest market for the Prius. It is a great car, though. I felt a bit bad when I replaced my California-manufactured Corolla with my Prius but it is hard to argue with 48MPG. Also it is a fun car to drive and very comfortable. Considering that California is a market of almost 40 million people it is ridiculous that there is only one auto plant in the state, and none in SoCal. (The Fremont plant is a GM-Toyota joint venture-where my Corolla was built in 1989.)

by Zack from the SFV 2008-07-21 09:52AM | 0 recs
Re: The Prius to be made in the USA

You know there used to be a big old GM plant in the middle of the valley. I think it's just too expensive to build cars in California. Maybe when we get universal health coverage, the U.S. automakers will be able to afford to build cars here again.

by LakersFan 2008-07-21 10:44AM | 0 recs


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