Toyota Suspends production on U.S. Prius Plant

ERLANGER, Kentucky — Toyota is halting work on its new Blue Springs, Mississippi, plant, leaving the start of production uncertain for its Prius hybrid.

But Toyota hastened to reassure U.S. consumers that the work stoppage will not affect Prius availability in the United States.

"We've got enough Prius capacity in Japan to meet North American demand at this time," said Mike Goss, external affairs manager for Toyota Motor Engineering and Manufacturing North America, in response to an e-mail query from Inside Line.

The construction of the plant, Toyota's eighth in the U.S., originally was seen as a major attempt to keep up with growing demand in the U.S. market. But demand for the Prius has slowed considerably. Toyota's November 2008 sales report showed that Prius sales were down 48.3 percent versus November 2007. Toyota sold 8,660 Prius hybrids in the U.S. in November 2008, compared with 16,737 in November 2007.

"Due to the steep decline of the auto market, Toyota is suspending preparations for its Mississippi plant," the company said in a statement on Monday. "Since the building itself is already about 90 percent complete, Toyota will go ahead and finish that portion of the project.

"This will bring Toyota's total investment to date to about $300 million. But we'll be holding off on subsequent activities, such as equipment installation. This likely means that start of production will be delayed. Due to the uncertainty of the market, it is impossible to say at this time when production will begin."

Toyota originally had earmarked $1.3 billion for the Mississippi plant and projected employment at around 2,000. Production was slated to begin in late 2010. Last month, the Nikkei reported that declining U.S. sales had forced Toyota to consider postponing production to 2011 or later at the Mississippi plant.

"We are committed to completing the Mississippi plant when market conditions allow," said Toyota. It added that, "for employees already on staff at Toyota Mississippi, their jobs are secure." It did not disclose how many workers had been hired thus far.

The suspension of building at Toyota's Mississippi plant comes on the heels of news from General Motors that it will put the brakes on North American production in January. General Motors on Friday said it will slash another 250,000 vehicles from its North American production forecast for the first quarter of 2009. The latest cuts involve 20 assembly plants, including three each in Canada and Mexico. The cuts also affect the automaker's Bowling Green, Kentucky, plant, which builds the Chevrolet Corvette and the Cadillac XLR, as well as GM's Lansing Grand River plant, which builds the Cadillac CTS and the Cadillac STS.

Inside Line says: Toyota's dilemma in Blue Springs presents powerful evidence that the industry's problems are not limited to Detroit-based automakers. — Anita Lienert, Correspondent