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Truck Slump Hits Toyota Production Plans

Even giant Toyota is forced to rethink their production plans and schedules, in light of plummeting truck and large SUV sales. Going into 2008 analysts expected a bad sales year for the U.S. automotive market. Still the first half of the year has been worse than predicted, and marked by a mass exodus from large trucks and SUVs. No one expects truck and large SUV sales to recover to pre-$4 gas levels, but it is impossible yet to know just how much of this dramatic and shocking shift is permanent.


Against this backdrop, Toyota announced today that Tundra and Sequoia production will be suspended in August, resuming again in November of this year. (The Sienna minivan, also built in Indiana, is so far unaffected.) This follows similar announcements over the past few months from Ford, General Motors, and Chrysler of lengthened shutdowns of truck and SUV production, and even Ford’s delayed launch of the new-for-2009MY F-150.

Even temporarily halting production is an expensive proposition, and particularly unusual for brand-spanking-new entries like Sequoia and Tundra. In today’s rapidly changing market, it is better than building products that are a hard sell even under very heavy incentives. Manufacturers kept the plants running and used incentives to prop up sales over the past several years, but the result was one degree or another of unrealistically high truck and SUV sales. Incentives also reduce residual values and, especially combined with extreme fuel-sensitivity issues, hurt the product’s overall image. Production slowdowns and shifts are disturbing for the workers and for anyone watching the U.S. manufacturing industry. But for these automakers, this short-term pain is necessary for hope of long-term viability, true even if the end is not yet in sight.

Toyota’s Princeton, Indiana, facility, as seen from the sky.
In suspending production for a couple of months, Toyota takes the long view.

Beyond adjustments to reduce today’s inventory, Toyota will move Tundra out of the Indiana plant and rely solely on the newer San Antonio, Texas, plant beginning in spring 2009; this reduces overall Tundra capacity to bring it in line with Toyota’s expectation of a smaller full-size pickup truck market in the coming years. The Indiana facility will take in the Highlander in fall 2009, a product that was scheduled for Toyota’s Mississippi plant, still under construction. The Highlander is seeing its own sales challenges this year as well. Instead, as the market demands more fuel efficiency and Toyota expects increased worldwide demand for the next-generation Prius, Mississippi will be the U.S. production home for the next hybrid. Mississippi production of the Prius is scheduled for late 2010CY; this will be the second Toyota/Lexus hybrid to be built outside of Japan (Camry being the first).

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