Toyota Motor Corp. will delay plans to add a second shift at its new assembly plant in Woodstock, Ont., amid falling global sales of its RAV4 crossover-utility vehicle - marking the first example of the U.S. sales slump affecting the Canadian operations of a Japan-based auto maker.
The new plant will open as scheduled in November, but plans for the second shift and full production of 150,000 vehicles annually have been put off indefinitely, Toyota Motor Manufacturing Canada Inc. president Ray Tanguay said yesterday.
"We had some concerns about how to balance our production capacity versus the market demand especially in light of what's happening in North America now," Mr. Tanguay said yesterday. "As we look at Woodstock we want to make sure we feel secure enough about when we start the second shift."
The original plan for the $1.1-billion investment in Woodstock called for adding the second shift during the second quarter of 2009, which would take the plant to its full employment of 2,000 people. Initial production will be set at 75,000 vehicles annually, which is lower than the initial target of 100,000 vehicles when plans for the factory were first announced in 2005.
Production was later bumped higher to the 150,000 level.
The plant will begin producing RAV4 models as scheduled in November, he said, and only about 1,200 people have been hired.
This is the second change in plans for Toyota this year amid the slump in the U.S. market that has battered the Detroit Three - and their Canadian assembly operations - but now is spreading to offshore-based auto makers as well.
Earlier this year Toyota delayed the opening of a new plant in Mississippi that was scheduled to manufacture its Highlander crossover utility vehicles.
Instead of building Highlanders, the Mississippi factory will begin producing Prius hybrid cars in 2010 and other U.S. plants will be retooled to build Highlanders.
Toyota's pickup truck and sport utility vehicle plants in Texas and Indiana also have scaled back production, with the Texas pickup plant halting output altogether for three months. Unlike the Detroit-based auto makers, however, Toyota did not lay off its workers and is keeping them in the factory for training and working on quality improvement projects.
RAV4 sales fell 18 per cent last month in the U.S. market, which will be the destination for about 85 per cent of the vehicles to be assembled in Woodstock.
Sales of the vehicle are down globally, Mr. Tanguay said, so it makes little sense to add too much capacity in North America because then the two plants in Japan that produce the RAV4 might have to cut production.
"The only place that [sales are] positive is in Canada, but unfortunately the Canadian market is only about 10 per cent of the North American market," he said.
Sales of the Lexus RX350 luxury crossover made in Cambridge, are also down, he added, but the plant is still producing at full volume.
"We're watching that one," he said. "I think we're in a better position with the Lexus."
Last week, the auto maker trimmed its forecast for 2009 global sales to 9.7 million from a previous forecast of 10.4 million.
TM (NYSE) rose 86 cents to close at $88.82 (U.S.).
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