This may be bad news for Toyota's US factory workers.
Many people assume that when they buy a car from a Japanese brand, they aren't supporting the US economy. However, the Toyota Camry is not only built in Kentucky, it is the most American car on sale today. In fact, Toyota just invested over $1 billion in its Kentucky plant, in order to modernize the factory. Unfortunately, this large investment may not have been enough. Automotive News reports that Toyota factory workers in Kentucky have just been warned that it is currently cheaper to build the Camry in Japan than in the US.
In a two and half minute video, the plant's president told his workers that it is cheaper for Toyota to build a Camry in Japan, and ship it all the way to Kentucky. In the video, Wil James, who has managed the plant for more than seven years, told the workers "I'm not sharing this to scare you, but to heighten your awareness of the current risk we now have." He added that Toyota will continue to invest in the factory, "But all of this is on the assumption that we can make as much progress in cost reduction and efficiency as we've made in quality and safety." If the Kentucky plant can't learn to cut costs and become more efficient, it could be bad news for US production.
The video, which was acquired by Bloomberg News, shows off a new cost cutting initiative that is being spearheaded by company President Akio Toyoda. The cost cutting measures are supposed to free up cash for R&D to develop advanced technology such as electrification and artificial intelligence. Toyota's factory in Kentucky is the second-largest assembly plant in North America and Toyota's largest in the world. The factory has been upgraded to build Toyota's New Global Architecture, which will underpin new models. Unfortunately, the Kentucky plant hasn't integrated Toyota's new cost-cutting production system, which is already being used in Toyota's Tsutsumi plant in Japan.
"If you can make more profit from a Tsutsumi Camry than a Kentucky-built one, which plant would you pick to build it?" Wil James said in the video message. He told workers they'll learn more about the cost gap and asked for "a lot more ideas to reach parity." This news is coming at a time when President Trump is on a huge push to get foreign automakers to invest in the US. The Toyota video may have been an attempt to quell pro-union talk at the Toyota plant. The United Automobile Worker's has been unsuccessful in organizing Japanese, German or Korean automakers' US plants, but this stunt may have actually pushed workers towards unionizing.
With this message Toyota is trying to make the choice not between joining a union or not, but between voting for a union or having a job," said Harley Shaiken, a labor professor at the University of California Berkeley. This could be a serious issue to monitor if Toyota has trouble cutting costs in its US factory.