Toyota Strains to Meet Surging Demand for New Prius

Toyota’s Tsutsumi plant was abuzz with drills and other machinery Friday, with workers brought in from other, less busy plants to crank out the new Prius to keep up with bursting demand for the hybrid car.

But the Toyota Motor Corp. executive in charge of production said plans to open a U.S. plant to build the third-generation model of the world’s top-selling hybrid were still on hold.

The Prius has been rare bright spot not just for money-losing Toyota but also for the overall auto industry, hammered by the global slump and U.S. credit crunch. It was the top-selling model in Japan last month.

Still, worries about the U.S. auto slump since the financial crisis hit last year were too great, Executive Vice President Takeshi Uchiyamada said. Originally, a Prius plant in Blue Springs, Mississippi, had been scheduled to be up and running by 2010, but such plans were still frozen.

“I am extremely unhappy with the situation,” Uchiyamada said. “It all depends on how the economy recovers.”

A plant to make the gas-electric hybrid involves more investment than a standard plant because the vehicle has more parts for ecological technology. Going ahead with such an investment is too risky until Toyota monitors the U.S. market longer, he said at a reception for reporters in Toyota, the central Japanese city named after the automaker.

Getting the U.S. hybrid plant off the ground will take at least a year until a decision gets made, and so for some time to come, the Prius will continue to be shipped from this plant in Toyota city, one of just two plants in the world — both in Japan — that make the remodeled Prius.

Toyota officials said the two plants were making about 50,000 Prius cars a month, running at full capacity. The Tsutsumi plant was churning out one Prius every 66 seconds in one line, and every 57 seconds in the other line. Reporters toured the plant Friday.

Overtime is back at Tsutsumi from April — all thanks to the Prius — at a time when other Japanese plants are idle, grappling with layoffs or collapsing.

Workers from other factories from as far away as the southwest island of Kyushu are helping out at Tsutsumi, plant official Takahiro Fujioka said, while declining to give numbers.

Tsutsumi assembly line workers were rapidly screwing in bolts, using innovations they had come up with like picking up several bolts at once with magnets. Incorporating such cost-saving ideas from the workers has long been a part of “Toyota production methods,” which are emulated at plants around the world.

The Prius symbolizes Toyota’s hopes for a turnaround after the world’s No. 1 automaker suffered its worst annual loss last fiscal year since its 1937 founding — and predicts more red ink this year.

The global auto industry has been hammered, with two of the U.S. “Big Three” automakers, General Motors Corp. and Chrysler LLC, filing for bankruptcy protection.

Sales of the Prius and other hybrids are expected to grow not only in Japan but also in the key U.S. market because of President Barack Obama’s stringent mileage and emissions standards for 2016.

“Hybrids are going to be hot-sellers,” said Koji Endo, auto analyst with Credit Suisse in Tokyo. “At least for the next three or five years, Toyota will have a definite advantage over the rivals.”

Although GM and Ford Motor Co. will be pushing their own hybrids in coming years, they aren’t as financially strong as Toyota to develop hybrids, Endo said.

The problem for Toyota is that booming Prius sales are eating away sales of more profitable models, he said.

Executive Vice President Masatami Takimoto, the executive in charge of technology, agreed that governments around the world were going to push green policies but stopped short of saying Obama’s program would be a boon for Toyota’s hybrids.

“We still can’t see what will be the best technology,” he said of future U.S. requirements. adding that tiny electric vehicles could also be the answer for some regions.

Toyota will continue to develop “the right cars at the right time for the right region,” he said. But it was clear autos need to rely less on oil, making hybrids a key technology for all kinds of green vehicles, Takimoto said.

Toyota, which is targeting sales of 400,000 Prius vehicles globally a year, has said that its Japanese dealers have been so flooded with orders a customer ordering a Prius today won’t get it until November or later.

The Prius, now in its third generation since its 1997 introduction, is the best-selling gas-electric hybrid in the world, racking up more than 1.27 million vehicles in global sales.

Akihiko Otsuka, the chief engineer for the Prius, boasted that rivals, now all revving up hybrid production to keep abreast of the green trend, will have a hard time catching up with Toyota.

That’s because Toyota has collected valuable data over the past decade in feedback from users, which helps engineers develop a better product, he said.

“We are 10 years ahead,” he said.

6/5/2009 7:06 AM YURI KAGEYAMA AP Business Writer TOYOTA, Japan