DETROIT — Toyota Motor Co. is expected to announce this week that it will build a $1-billion truck plant near Evansville, Ind., a move that challenges the Big Three in their most lucrative part of the market.
The decision will be announced as early as Thursday by Toyota President Hiroshi Okuda, who is directing the auto maker's global strategy of shifting manufacturing into foreign markets where high-volume vehicles are sold.
"Where there's smoke, there's fire," said one Toyota official. "It's hard to keep a lid on this."
In June, after U.S. and Japanese negotiators had reached an auto trade accord, Toyota said it would increase its North American manufacturing operations and also purchase more U.S. auto parts.
The search for a site for the new truck plant focused on Indiana, Kentucky, Tennessee and Ohio. Evansville, located in the southern part of the state about 200 miles from Toyota's plant in Georgetown, Ky., quickly emerged as the favorite.
Ken Robinson, executive director of the Evansville Regional Economic Development Corp., said the project would provide an economic boost to the city, which lost a Chrysler auto plant in the late 1950s.
The new plant is expected to employ more than 1,300 workers and have the capability of producing 100,000 vehicles a year. It will begin making T100 full-size pickup trucks in 1998.
The truck will compete against General Motor's Chevrolet C/K pickup, Ford's F-150 series and Chrysler's Dodge Ram. This year, Toyota is expected to sell about 35,000 T100s imported from Japan.
Full-size pickups, along with minivans and sport-utility vehicles, have been the hottest segments of the auto industry. They are also among the most lucrative, each sale providing the auto makers with hefty profits.
But the Japanese have had trouble competing because imported trucks are hit with a 25% tariff. In addition, the strong yen has made imported vehicles more expensive in the last two years.
The current T100 costs up to $2,500 more than its competitors, even though it is equipped with a V-6 engine. The U.S.-produced version will be equipped with a more powerful V-8 engine, as many domestic pickups are now.
Steve Kosowski, an analyst for AutoPacific Inc. in Santa Ana, said the new plant "shows the Japanese are serious about the U.S. truck market and serious about North America assembly."
In choosing the rural Indiana site, Toyota is following other foreign manufacturers that prefer to operate away from the traditional auto-making corridor in the heavily unionized upper Midwest.
The two most-recent so-called transplant factories--a Mercedes-Benz plant near Tuscaloosa, Ala., in 1994 and BMW's plant near Greenville, S.C., in 1991--were located in rural areas with highly motivated, skilled, non-union work forces.
It could not be determined what incentives Indiana is offering Toyota. But it is certain to become an issue because Gov. Evan Bayh, a Democrat, criticized the previous Republican administration for giving too much to Subaru and Isuzu to build a joint-venture plant in the state a decade ago.
Probably just as important to Toyota as incentives is having a plant within a day's trip to most of its auto suppliers. Toyota uses a just-in-time delivery system that requires suppliers to ship parts as they are ready to be installed on the assembly line.
The plant will be Toyota's fourth in North America and will boost its production capability to 1.2 million vehicles by 1998 from 735,000 in 1994.