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Toyota and Mazda to build $1.6 billion assembly plant in U.S. and partner on electric cars

The 2017 Toyota Prius Three. (Courtesy of Toyota)
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Toyota and Mazda corporations announced plans on Friday to build a $1.6 billion assembly plant in the United States and work together to develop electric car and advanced safety technologies.

The plant is expected to produce up to 300,000 cars a year and create jobs for 4,000 workers. It is expected to begin operations in 2021, but a location for the plant has not yet been decided.

Toyota will produce the Corolla model for the North American market, while Mazda will make cross-over models. As part of the deal, Toyota will gain a 5 percent stake in Mazda.

“This is a partnership in which those who are passionate about cars will work together to make ever-better cars,” Toyota's President Akio Toyoda said in a statement.

The announcement was greeted with a congratulatory tweet from President Trump, who campaigned on a promise to bring back manufacturing jobs to the United States. In January, Trump warned Toyota — in a tweet — that the company would be hit by a “big border tax” if it went ahead with plans to move operations to Mexico.

With Friday's announcement, Toyota will shelve plans to produce the Corolla in Guanajato, Mexico, and instead use the facility to make its Tacoma truck model.

The alliance grew out of a May 2015 agreement between Mazda and Toyota to “mutually benefit the companies in such forms as leveraging the resources of both companies and complementing each other’s products and technologies toward the goal of making more appealing cars,” Toyota said in a statement.

In practical terms, it is a way for Mazda to ensure its survival in a competitive market that requires more and more resources, analysts say.

“Toyota may benefit from a taste of Mazda’s zoom-zoom flavor and add to its global volume count, but most of the benefit of the linkup goes to Mazda, which desperately needs U.S. production in this protectionist era and help with advanced technology development,”  Michelle Krebs said in a statement. Krebs is an analyst for Autotrader, an online marketplace for car shoppers and sellers.

Karl Brauer, an analyst at Kelley Blue Book, said pooling resources could help Mazda compete in the development of electric vehicles and advanced safety technologies.

“Mazda is down on resources compared to many other automakers and they can't compete with companies like Toyota or Volkswagen on innovating,” Brauer said in an interview.  “It makes perfect sense that they would join with Toyota and help spread the cost of building the plant and producing the vehicles. Also, Mazda will get the benefit of all Toyota's advanced work on hybrids and electric vehicles.”

He also suggested that Trump's tweet in January might have prompted Toyota to reconsider its plans to shift production to Mexico.

“I don't know why else they would have switched,” Brauer said. “They could have revamped that plant in Mexico to allow for Mazda to produce there as well, or future electric vehicles. It would have been less expensive.”