Toyota Motor extended its political and manufacturing muscle in the United States with the announcement yesterday of a $1.3 billion assembly plant in Mississippi.
The factory, Toyota's fifth U.S. assembly plant, will employ 2,000 people and build the Highlander sport-utility vehicle when production begins near Tupelo in 2010.
Like other foreign automakers that have expanded in the South, Toyota was attracted by the region's low wages and largely nonunion workforce. Toyota also wins the support of Mississippi's political establishment, Gov. Haley Barbour (R) and Trent Lott, the No. 2 Republican in the U.S. Senate. Toyota held simultaneous news conferences -- one in Tupelo and the other in Washington with Sen. Thad Cochran (R-Miss.) and Bush administration officials.
"When you are in our constituency, we are warriors on your behalf," Lott said. "I can assure you we will look after your interests."
Speaking in Tupelo, Barbour described a Toyota assembly plant as "the crown jewel of economic development" that all state official hopes to obtain. Barbour promised that Mississippi would be "the best partner Toyota has ever had."
Toyota is in a heated battle with General Motors for the title of the world's largest automaker, and many analysts think it will surpass GM in worldwide production this year.
Barbour declared that Toyota was the "world's premier auto manufacturer."
Harley Shaiken, an economics professor at the University of California at Berkeley, said Toyota's move into Mississippi is part of an accelerating trend of foreign automakers trying to build political goodwill to head off protectionism.
"When Trent Lott says 'we'll be warriors for Toyota,' that's like a premium sound system in a Lexus," Shaiken said. "It's delivering a message that Toyota wants to hear. Trent Lott is saying he is the senator from Toyota."
Shaiken said the Japanese fear that success in the U.S. market could spark a backlash. "For Toyota, the most effective lobbying is a factory in Tupelo, not a lobbyist in Washington," Shaiken said.
Sales of the Highlander SUV have increased in recent years while the larger SUVs that underpinned Detroit automakers' profits have lost favor. Building the Highlander in the United States could help ease political pressure on Toyota; all the Highlanders now sold in the U.S. market are imported.
Toyota will produce 150,000 Highlanders a year at the Tupelo plant in the foothills of the Appalachian Mountains in Northeast Mississippi. Many workers in the area are employed in the upholstered furniture industry, which has suffered because of Chinese competition, according to economic development officials in the region.
Toyota's pay of $20 an hour will vault its employees to the top of the region's wage scales. Many workers there make $12 to $13 an hour. Union members who work in U.S. auto-assembly plants earn about $28 an hour, plus benefits.
Unions are scarce in the region. Only 2 percent of the workers in the area are union members, according to David P. Rumbarger, president of the Community Development Foundation of Tupelo/Lee County. Toyota has also been looking to keep a lid on labor costs to steer clear of the kind of the financial problems gripping Detroit.
The low cost of Toyota's labor could emerge as an issue in labor talks between the Detroit automakers and the United Auto Workers this year. U.S. auto officials say they expect to raise the problem of competitive wages with the union.
Toyota and other Japanese automakers have been sensitive to protectionism since the trade fights of the late 1970s and '80s. The Japanese companies had to contend with the rage of the UAW and Detroit auto executives who complained about eroding market share, lost jobs and plant closings.
Detroit automakers are in the middle of another round of industry downsizing, while Japan's full-throttle assault on the U.S. market rolls on. Toyota, which employs 41,000 people in the United States, has major assembly plants in Kentucky, Indiana, Texas and California. It also has plants in Canada and Mexico.
Toyota isn't the only Asian manufacturer building plants in the United States. Honda is at work on a new plant in Indiana. South Korea's Hyundai is building one in Georgia. And outside Jackson, Miss., a four-year-old Nissan plant makes Titan pickup trucks.