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Toyota to shift Corolla production to new $1.6B U.S. plant from Mexico

Nathan Bomey
Toyota and Mazda announce joint effort to build US factory

Japanese automakers Toyota and Mazda on Friday confirmed plans to build a $1.6 billion U.S. assembly plant with up to 4,000 new jobs as part of an extensive new alliance — and Toyota said it would make the Corolla sedan at the factory instead of Mexico as previously intended.

The sweeping partnership between the two companies includes investments in each other and collaboration on development of electric vehicles and self-driving car technology.

The deal marks a symbolically significant shift for Toyota after the company faced withering criticism from President Trump for its plans to locate Corolla production at a new $1 billion factory under construction in the state of Guanajuato in Central Mexico.

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Toyota said Friday that it would maintain its investment and hiring plans at the Mexico plant. But it will locate additional production of the Tacoma mid-size pickup truck at the Mexico factory instead of the Corolla, which had been set to move there from an operation in Ontario, Canada.

The Corolla will be located at the new factory in the U.S., which will be established as a joint venture between Toyota and Mazda and will open by 2021. The companies have not yet picked a location, which is likely to trigger a bidding war from states seeking to spur economic development.

Trump swiftly heralded the move. "A great investment in American manufacturing!" he Friday morning.

Toyota spokesman Scott Vazin said the company would continue to make the Corolla at its Mississippi manufacturing plant, as well, with no changes planned there.

The new plant will also offer Mazda its first U.S. production since the company ended local manufacturing in recent years following its transition out of Ford ownership.

Mazda said it would make crossover models at the plant for sale in North America. Currently, 100% of Mazda cars sold in the U.S. are made in other countries, according to Barclays.

Taken together, the plans are likely to be trumpeted as a victory for Trump's push to manufacture more locally sold vehicles in the U.S., even if it had no impact on the decision. He had threatened Toyota and other car companies for selling cars to American customers that were built elsewhere.

"NO WAY!" Trump said in a tweet about Toyota in January. "Build plant in U.S. or pay big border tax."

It also comes after Toyota and other car companies vocally opposed Trump's plans to pursue sweeping changes to the North American Free Trade Agreement, which bolstered Mexican manufacturing.

The tie-up could pave the way for a broader deal in the future, including possibly a Toyota move to acquire Mazda altogether, which would greatly accelerate industry consolidation for a sector that is grappling with high regulatory and technology costs.

"Today's agreement is a testament to the positive result of two years of collaborative and deliberate discussions between the two companies, and it is a milestone in the journey to further strengthen and accelerate the partnership in a sustainable way," Toyota and Mazda said in a statement.

As part of the deal announced Friday, Toyota is acquiring 5% of Mazda, while Mazda is acquiring 0.25% of Toyota.

In that respect the deal resembles the global alliance between Japanese automakers Nissan and Mitsubishi and French automaker Renault.

"Toyota and Mazda have been working more closely together, so it is no surprise they will have a plant together," analyst Michelle Krebs said, adding that Mazda had been searching for U.S. manufacturing capacity.