GEORGETOWN, KY (WWJ) – Toyota is increasing its manufacturing presence in the U.S.
“I’m pleased to announce one of our worst kept secrets,” said company President Akio Toyoda. “Starting in 2015, we’ll build the popular Lexus ES 350 sedan in the United States on a new dedicated assembly line at the plant in Georgetown, Kentucky.”
This will be the first Lexus built in the United States. Toyota had kept most of its Lexus production close to home, with nearly all of the luxury vehicles made in Japan. The one exception was the Canadian built RX-SUV.
Toyoda says this decision was made by Toyota’s new North American management team.
Toyota North America CEO Jim Lentz says this will be a $360 million investment.
“We’ll add 750 new American jobs,” he said.
That’s why the state of Kentucky chipped in $146.5 million in state incentives.
“Quite honestly, as governor, I feel like the state has just won the Kentucky Derby,” said Kentucky Governor Steven Beshear, at a plant celebration.
More foreign carmakers are producing vehicles in the United States. It offers a number of advantages, especially with a fast-changing exchange rate.
“Producing the Lexus ES in Kentucky makes sense for Toyota,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “While the tax incentives over the next ten years certainly didn’t hurt, the move will allow Toyota to further reduce the risk of a strong yen increasing production while ultimately reducing profits for those vehicles produced in Japan and sold in the US. Though the yen has declined in recent months, it remains historically strong, creating strong incentive for Japanese automakers to shift more and more production to the US.”
For Akio Toyoda, it’s about more than just the exchange rate. This also comes as Lexus, which had been the perennial U.S. luxury leader, is finishing behind BMW and Mercedes, and facing new challenges from Cadillac and Audi.
“It is fitting that the first country to build the ES outside of Japan is the United States,” said Toyoda. “This is home for Lexus. It’s where the brand was founded, and it is still the biggest market for the luxury brand.”
Kelly Blue Book’s Gutierrez says this should give the Lexus brand a boost.
“The move helps to bolster Toyota’s already strong image in the U.S. by adding 750 jobs at a time when sorely needed,” he said. “Shifting production to Kentucky signals that Toyota is willing to break tradition to gain a stronger foothold in the US and could hint that additional Lexus nameplates could be produced in the US later down the road.”
Toyota sales have bounced back this year, after a couple of difficult years marked by recalls and production disruptions, caused by natural disasters. All of that has prompted the company to increase its manufacturing presence in the United States.
They are in the midst of a two billion dollar expansion, says Toyota North America President Jim Lentz, adding a total of 4200 jobs.
“Today, Toyota operates 14 plants across North America to produce 7 out of every 10 vehicles that we sell here.”
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