Toyota’s ‘red wall’ tested as Trump blasts automaker’s Mexico plant plans
Japanese firm has history of investing in southern conservative U.S. states
When Trump administration appointee Wilbur Ross sat for a hearing on his commerce secretary nomination, one name kept coming up: Toyota. A senator from Vice-President Mike Pence’s home state asked to be reassured trade reforms wouldn’t compromise Indiana jobs. Another from Mississippi said he was “tickled to death” that Corollas are built in his state.
Call this the Japanese automaker’s red wall. Toyota started building it 30 years ago with its first assembly plant in Georgetown, Ky., in part to appease Washington during an era of icy U.S.-Japan trade ties. One after another, more factories sprang up in politically conservative states, including Alabama, Texas and West Virginia.
The questions put to Ross underscore concerns the White House is likely to hear if President Donald Trumpkeeps up his attacks on Toyota and its peers. After criticizing Toyota’s plans to build a Corolla plant in Mexico, Trump this week rebuked Japan for sending the U.S. hundreds of thousands of cars from what he said were “the biggest ships I’ve ever seen.”
“For years, Toyota was extremely paranoid about being a foreign company and about the possibility of tariffs,” said Jeff Liker, a University of Michigan professor who’s written nine books on the company. “They just try to be Boy Scouts, perfect corporate citizens, to hedge against a possible backlash.”
Toyota built more than 1.38 million cars and trucks in the U.S. last year, behind only GM, Ford and Fiat Chrysler Automobiles. Still, Toyota’s production fell about one million vehicles short of its sales in the country. Imported models include Japanbuilt Prius hybrids, Canada-assembled RAV4 and Lexus RX SUVs, and some Tacoma mid-size pickups manufactured in Mexico.
The $10-billion question for Toyota — it’s vowed to invest this much in the U.S. over the next five years — is whether all the roots it’s put down in America will be enough to mollify Trump. The carmaker’s shares have dropped 4 per cent since Trump called out its Mexico plans, following an 8-per-cent decline last year.
“I want new plants to be built here for cars sold here!” the president tweeted on Tuesday, ahead of a meeting with the chief executives of GM, Ford and Fiat Chrysler.
Toyota is scrambling to find something more to offer Trump than the factory expansion and modernization plan revealed Jan. 9, according to two people familiar with the discussions. The search gained urgency after Trump thanked Ford and Fiat Chrysler for their U.S. investments and made no mention of Toyota’s plans announced the same day, said the people, who asked not to be identified because the deliberations are private.
Shortly after the president met with the U.S. auto CEOs Tuesday, Toyota said it would add 400 jobs and spend $600 million retooling and updating an Indiana plant.
“Everybody in Mississippi wants more Toyota,” said Haley Barbour, the former state governor who in 2007 offered a $293.9-million incentive package to lure investment from the company. “I suspect you’ll find the same thing in Indiana, Kentucky, Texas and every other state where they operate.”
Toyota is in the process of completing a new North American headquarters in Plano, a suburb of Dallas, Texas. The campus will use as much glass as nearly 50,000 Tacoma truck windshields and house about 4,000 employees, including 1,000 new hires.
Hoosiers working at plants including Toyota’s in the state of Indiana could use reassurance their jobs won’t be put at risk by Trump-proposed tariffs that may interrupt global supply chains, Republican Sen. Todd Young told Ross during a confirmation hearing last week.
“The best way to deal with the trade deficit is increased exports. I think that’s a No. 1 priority,” Ross responded. “No. 2 is to get the Toyotas and other companies like that to build their factories here.”
Trump’s anti-import rhetoric is reminiscent of the days then-Chrysler CEO Lee Iacocca urged former president Ronald Reagan to limit incoming shipments of Japanese cars. Models such as the Corolla and Honda Civic gained recognition for reliable quality and superior fuel economy during the 1970s energy crisis.
Toyota and its Japanese peers voluntarily agreed to quotas and sought political cover as laid-off Ford workers in Detroit smashed imported cars with sledgehammers. Toyota followed its American competitors to Southern states to dodge the United Auto Workers union, positioning the company in red states, where the Republican Party reigns supreme.
Toyota has built goodwill over the years by avoiding layoffs even when idling plants, and by helping rebuild New Orleans after Hurricane Katrina. Still, Liker said company officials haven’t been this jittery about how they’re perceived in the U.S. since 2010, when some felt unfairly singled out while the carmaker recalled millions of vehicles over unintended acceleration concerns.
“They became more comfortable after they started building factories here, but the wariness is still pretty high,” Liker said.