Toyota Cuts Back on Trucks

Toyota Motor Corp. has worked hard to demonstrate how American a car company it can be. The company bought naming rights to the Toyota Arena in Houston (and the connected Toyota Tundra garage), built a truck plant deep in the heart of Texas and even joined NASCAR. Now Toyota is really behaving like its Detroit cousins: it's shedding production because of slow sales.

Toyota, which is No. 2 in vehicle sales after General Motors Corp., plans to suspend temporarily its production of Tundra pickup trucks and the Sequoia sport utility vehicle, starting August 8. Suburban cowboys are dumping their trucks and SUVs in the face of higher gas prices, and Toyota is not immune. "They're facing the same structural problems as everybody else," said David Cole, chairman of the Center For Automotive Research in Ann Arbor. The names Tundra and Sequoia just scream "more $4 gas."

Production will halt at both the new Tundra plant in San Antonio, Texas, and one in Princeton, Ind. where the Sequoia was scheduled resume production in early November. "The truck market continues to worsen, so unfortunately we must temporarily suspend production," said Jim Wiseman, vice president/external affairs for Toyota Motor Engineering & Manufacturing North America.

Toyota, which sank nearly $2 billion in the Tundra project, has the capacity to build 400,000 pickup trucks but will probably sell only 150,000. "The vehicles have not done as well as they expected," said Alan Baum, an analyst with The Planning Edge in Birmingham. But trucks now sit on dealer lots for 64 days before they sell. "That's almost unheard of for Toyota," said Tom Libby, an analyst with J.D. Power & Associates. "They could have cut the price but they decided not to," he added.

Toyota employees in Texas and Southern Indiana, as well as at the automaker's motor plant in Huntsville, Ala., which builds V8 engines for Tundra and Sequoia, will continue to be provided various work projects through a program similar to the much-criticized "Jobs Banks" used by Detroit automakers that have supported workers during production cuts. "By using this downturn as an opportunity to develop team members and improve our operations, we hope to emerge even stronger," said Wiseman.

The shutdown will affect more than 10% of Toyota's 43,000 employees in the U.S. Toyota is also scrambling to rebalance its manufacturing operations to accommodate its best sellers. The company said it will build hybrid Priuses at a plant now under construction in Blue Springs, Miss. The Blue Springs plant is scheduled to open in 2010. The Highlander crossovers that were supposed to be made in Mississippi will be made in Indiana instead, and all pickup trucks will be made exclusively in Texas, according to Toyota.