Toyota to build $1.3 billion plant in Mississippi

By Kevin Krolicki

DETROIT (Reuters) - Toyota Motor Corp. said on Tuesday it would build a $1.3 billion assembly plant near Tupelo, Mississippi, the latest step by the fast-growing automaker to keep pace with American demand for its light trucks and cars.

Toyota said the new plant, which will employ some 2,000 workers, would build its next-generation Highlander sport utility vehicle. The plant, expected to begin production in 2010, will have the capacity to produce 150,000 vehicles per year.

Toyota, which is expected to claim the title of the world's biggest automaker from General Motors Corp. this year, had said it was looking to build its eighth vehicle assembly plant in North America.

Other states, including Arkansas and Tennessee, had been vying for the plant and the jobs it will create in production and related industries like construction and auto parts.

With a 13-percent jump in 2006 sales, Toyota overtook Chrysler as the No. 3 car maker in the United States in 2006, putting its market share at a record high 15.4 percent. Toyota is widely expected to edge past Ford Motor Co. this year.

Toyota said it had been granted about $296 million in tax incentives by Mississippi, which would be less than roughly $360 million in concessions granted to Nissan Motor Co. for opening an assembly plant in Mississippi in 2003.

"Early on, Toyota made it clear to us that they didn't want to engage in an incentive bidding war," Mississippi Gov. Haley Barbour said in a news conference from Tupelo monitored by Webcast.

Barbour said the plant could ultimately employ up to 4,000 workers, although Toyota's initial hiring target was only half of that. The jobs will pay about $20 per hour plus benefits.

Ahead of the opening of the Mississippi plant, Toyota will add a combined 250,000 units in annual capacity in North America by using a line at an Indiana factory of affiliate Fuji Heavy Industries and opening a new Canadian plant next year.

Late last year, Toyota began production of the all-new Tundra pickup truck at a new 200,000-units-per-year factory in San Antonio, Texas.

POTENTIAL FALLOUT

Toyota has been under pressure to boost North American production to avoid the potential political fallout from the jump in its vehicles shipped from Japan to the United States.

Last year, just more than half of the vehicles Toyota sold in the United States were built in North America, compared with a rate of more than 70 percent for rival Honda Motor Co..

Toyota's sales have grown at an average rate of almost 9 percent over the past decade, and many analysts say Toyota will need to add four or five additional assembly plants.

The Japanese automaker has set a goal of having 60 percent local production in the United States.