Toyota halts U.S. Prius project

Lindsay Chappell
Automotive News
December 15, 2008 - 2:10 pm ET
UPDATED: 12/15/08 4:55 p.m. ET



NASHVILLE -- Toyota Motor Corp. is freezing its plan to build Prius hybrids in the United States as it battles a collapse in global profits by cutting spending.

Toyota's board reached the decision late today, Japan time, to halt the $1.3 billion project near Tupelo, Miss., "due to the steep decline" in the United States. Toyota has no timetable on resuming construction, spokeswoman Barbara McDaniel said. The plant will build the Prius when the project resumes.




U.S. sales of the market-leading hybrid have softened as gasoline prices declined from their summer peak of more than $4 a gallon. In November, the Prius accounted for 8,660 U.S. sales, down from 16,737 a year earlier.

Total Toyota U.S. sales fell 32 percent in November.

The move reflects the increasing pressure on Toyota's global profits. Last month, Toyota said it will do everything it can to meet a reduced operating profit forecast of about $6.6 billion for the fiscal year that ends March 31 -- less than half of its initial projection.

Options include halving the number of temporary workers it employs in Japan, delaying new factory launches and cutting r&d costs, Toyota said. Reducing salaries and bonus payments for directors also is on the table.

Toyota has more than a dozen factory projects in the pipeline, including plans to expand vehicle capacity by more than 55 percent in China in the next few years, and to build new car plants in India and Brazil. It also has a new joint venture factory for batteries due in early 2010 to power hybrid cars.

"It would be natural to expect a delay in new factories,'' said Tairiku Sakaguchi, auto analyst at Japan's Shinko Securities.

Speculation about the Mississippi plant's future has circulated for weeks as Toyota and the rest of the U.S. auto industry slashed North American production. This is the second time Toyota has changed plans on the Mississippi project, which has begun to draw component suppliers to the area.

Toyota originally announced in February 2007 that it would spend $1.3 billion in Mississippi to produce a new generation of Highlander crossovers. After work began, SUV sales began to soften and demand for hybrids grew as gasoline prides soared. In July of this year, Toyota said it would instead build the Prius there.

Toyota said in a statement it will continue constructing the building, which is about 90 percent completed. But the company said it hadn't yet ordered the equipment that will go into the plant.

The operation has already hired about 100 people for administrative and management positions. Toyota said: "Their jobs are secure."

Reuters contributed to this report.

 

Wow... crazy turn around from 6 months ago when there was a new Prius coming to save the day with new plants planned on being built here in the states plus a Lexus version of the Prius rumored to be coming out soon, and a whole new Prius brand spin off.

 

I suspect that Toyota realizes that the last thing the world needs right now is yet another auto plant, even if it does make a product that's rather popular.

 

That is what I was thinking, the US market isn't 17 million units a year anymore and probably won't be again for a few years.

 

Think something more like 10.5M units for the next two years, 12M in '11, and maybe 14M in '12. A jump back to 17M/year would require either huge income growth in the US (something that hasn't yet occurred this decade), or a substantial increase in population. It might be towards the latter half of next decade before this happens.

 

Very interesting. The way the press has been reporting lately, one would think it's only the Big 3 that are hurtin' right now.

 

Okay, it's now officially the end of the world. If the Jesus car can fall, then we're all dead.

 

Think higher fuel prices, let say $6 by 2011, would kick start demand for 40mpg cars and 30mpg crossovers and get sales up sooner?

 

There's a difference between recognizing what the market conditions are and planning accordingly, versus bleeding to death.

 

I've got a hard time believing that demand for cars will increase substantially until consumer purchasing power increases. Of course, any change in fuel prices will affect the sales mix.

 

lmfao!!!!!

 

Current credit crisis/economic climate aside, I think this does at least in some way verify my suspicions that the "great hybrid push" was more about fuel prices than actually wanting to "help the environment". It would be interesting to see if Prius sales pick up after we're out of this mess and if prices stabilize at under $2 at the same time.

 

In truth, it invariably comes down to a "What's in it for me?" for the customer to be inspired.

 

I suspect there's alot of "Me too-ism" involved with the Prius.

Prius sales are down about 50%. Ford's Escape Hybrid is down something like 15-20%.

One is a "Hey, look at me... I'm saving the planet" advertizement to others. The other is a "I'm saving gas" regular joe, workaday vehicle that looks like any other Ford Escape. One has been decimated in sales, the other only a speedbump.


I guess this is an instance where the economy forced people to find a cheaper "Look at me", "I wanna fit in" fad.


(Did I ever say I hate the Prius and found the South Park episode on them absolutely on the mark regarding Prius owners? )

 

And don't forget the "tax credit-ism" and the "carpool lane exempt sticker-ism" which have been chopped in half and eliminated respectively. There are lots of ways to manipulate "demand" for a particular vehicle.