Toyota halts production of trucks, looks to Prius

Toyota Motor Corp., the seemingly unstoppable juggernaut that saw its U.S. sales double in the past decade, has come back down to earth.

Stung by double-digit sales declines and burdened by a growing inventory of slow-selling pickups, Toyota said Thursday it will start making the Prius hybrid in the U.S. and will stop truck and SUV production to meet changing consumer demands.

Industrywide, U.S. auto sales have dropped 10 percent in the first six months of this year and are moving at their slowest pace in more than a decade. High gas prices have accelerated the drop in pickup and sport utility vehicle sales faster than automakers had predicted, and they're scrambling to keep up with demand for smaller, more fuel-efficient cars.

“Toyota isn't immune to $4 gas and the recession in the housing market,” said Erich Merkle, an auto analyst with Crowe Chizek and Co., a Grand Rapids, Mich., accounting and consulting company. “It's almost as though Toyota always defies gravity, and in this case, they don't.”

Toyota said the moves will not affect any full-time workers, who will get training and do other projects during the shutdown. But the company is laying off around 700 temporary workers.

Toyota said it will start producing the Prius in late 2010 at a plant it is building in Blue Springs, Miss., just northwest of Tupelo. Toyota already builds a hybrid version of the Camry sedan in Kentucky, but this will be the first time the Prius, on sale for more than a decade, will be built outside of Japan and China.

Prius sales fell 34 percent in June as Toyota failed to keep up with demand for the car, which gets 46 miles to the gallon. Priuses sit on the lot for four or five days before being sold, according to Tom Libby, senior director of industry analysis for the Power Information Network, a branch of J.D. Power and Associates.

By contrast, the Toyota Tundra pickup is on the lot for 64 days before it is sold.

“Any additional Prius production is going to be extremely timely,” Libby said.

Toyota will suspend production of the Tundra pickup at its San Antonio truck plant and the Sequoia sport utility vehicle at its Princeton, Ind., plant for three months starting Aug. 8 because of declining demand. Next spring, it will stop producing Tundras in Princeton and consolidate all truck production in San Antonio.

The Princeton plant, about 20 miles north of Evansville, will now make the Highlander SUV, which originally was scheduled to be made in Mississippi. The Princeton plant will continue to make the Sienna minivan throughout the shutdown, Toyota spokesman Mike Goss said.

Toyota's U.S. sales fell 21 percent in June compared with the year before, an even steeper decline than the industrywide slump of 18 percent.

Toyota generally doesn't lay off full-time workers during shutdowns, as U.S. automakers do. “We don't just want to send everyone home because it makes for a bad startup condition when we start back in November,” Goss said.

Jim Schmidt, a director at the manufacturing research group Harbour Consulting Inc., said Toyota has some of the most flexible plants in the industry and should be able to convert them without major investments such as new robots or paint shops.

Toyota has 13 North American plants and two under construction in Mississippi and Ontario. The automaker has more than 43,000 workers in North America.