By NORIHIKO SHIROUZU
June 19, 2008; Page B2
Toyota Motor Corp. is likely to struggle to make money at its two truck plants in the U.S. this year, a consulting firm said, underscoring the toll slumping sales of trucks and sport-utility vehicles are taking on auto makers of all stripes.
The company is still likely to generate substantial profits in North America, thanks to booming sales of cars such as the Camry sedan and the Prius hybrid. But until recently Toyota had hoped an expansion into trucks would boost its bottom line in the U.S.
Wednesday, Toyota said it is slowing production at two of its truck plants in North America, in San Antonio, Texas, and Princeton, Ind., in a second such move to adjust the pace of work. In addition to slowing the assembly-line speed, San Antonio's truck line, which makes the Tundra pickup, will be shut down for 14 days between now and the end of October. The Princeton plant is taking out six days or more of production between now and the end of August. At both plants, workers on each shift will work seven hours instead of eight assembling cars and will spend one hour in training. The seven-hour shift will start in July. It wasn't clear how long the new work arrangement will last.
Toyota had slowed production at the plants previously this year. According to a study by CSM Worldwide, a market-research firm in Michigan, the San Antonio plant is projected to operate at 72% of its capacity this year, and the Princeton plant at 45%. CSM's projections already reflect the most-recent production cutbacks Toyota announced, the firm said.
Both expected capacity-utilization levels mark big drops from the near-100% utilization rates Toyota usually has maintained.
At those rates, Toyota most likely no longer can expect to make a profit producing trucks in the U.S., which in the past have offered fat profit margins. "Typically you need to be at 75% to 80% of the capacity to be profitable," said Mike Jackson, a senior analyst at CSM.
"Clearly we are not in good shape [at those two truck plants], but we're doing everything we can to be flexible and keep the plants open," Toyota spokesman Mike Goss said. He declined to discuss the profitability of the plants.
The anticipated drop in utilization raises a "cause for concern," said Mr. Jackson. Since the late 1980s when Toyota began producing cars independently in North America, the auto maker has operated those factories as a whole at higher than 95% and sometimes above 100%.
According to CSM, the San Antonio plant has the capacity to make 200,000 trucks a year, but CSM expects it to produce about 144,000 this year, bringing its capacity-utilization rate down to 72%. CSM expects the plant's capacity utilization to rise to about 73% in 2009. The utilization rate was 92% in 2007.
Toyota's plant in Princeton is also capable of producing 200,000 trucks a year but CSM projects it will make around 91,000, dropping its capacity usage to about 45% from 62.5% in 2007 and 76% in 2006. The plant produces the Tundra pickup truck and the Sequoia SUV. CSM expects the rate to stay at 45% in 2009. (In Princeton, Toyota also produces Sienna minivans at a separate plant on the same site.)