Will Toyota Build a Second Mexico Plant as Yen Surges?

Toyota Corolla
Toyota Corolla

Toyota reportedly is considering building a second plant in Mexico as the world's largest automaker shifts more production outside Japan to remain competitive. The relative strength of the Japanese yen on world markets is said to be prompting the move.

The second plant would build compact cars for the U.S. market beginning around 2013, Reuters reported, citing a story on Saturday in the Asahi newspaper. The paper, which cited unnamed sources for the information, also said the new plant will help Toyota respond to growing demand for low-cost compact cars in Mexico.

The company's existing plant in Mexico manufactures pickup trucks primarily destined for the U.S. market.

Akio Toyoda: It's Not So

Toyota's popular Corolla compact sedan used to be produced at a plant in Fremont, Calif., in a joint venture with General Motors. But the plant went idle after GM's descent into bankruptcy last year, leaving Toyota to shift some Corolla production for the U.S. market to Japan.

Due to the strength of the yen, however, Toyota is considering halting Corolla exports from Japan, according to media reports there. In Tokyo trading on Monday, the yen hovered at a 15-year high against the dollar and other currencies.

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In response to the reports, Toyota Motor (TM) President Akio Toyoda on Monday denied that the company is stepping up efforts to shift production out of Japan, the Kyodo news service reported.

"Logically, it doesn't make sense to manufacture in Japan," Toyoda told reporters in Nagoya, close to the company's headquarters in Toyota City. "But I feel a sense of crisis and worry what would happen to this country, which largely depends on manufacturing, if Toyota [scales back production in Japan]."

Toyoda said that while producing in Japan is now "very tough," the company believes it's important to maintain production at home.

Originally published