Toyota-Mazda plant: Alabama bids to become a major auto hub

Toyota Motor Corp. President Akio Toyoda, left, and Mazda Motor Corp. President Masamichi Kogai in Tokyo, on May 13, 2015. (AP / Shizuo Kambayashi)

MONTGOMERY, Ala. -- Alabama, seeking the fast lane in its bid to become a major auto making hub in the South, has landed a coveted $1.6 billion joint venture plant by Japanese car giants Toyota and Mazda that will eventually employ 4,000 people.

The new plant is to be located in Huntsville, Alabama -- already a hub for the region's budding aerospace industry -- and will produce 300,000 vehicles per year, a combination of the Toyota Corolla compact car and a new small crossover SUV from Mazda. Production is targeted to begin by 2021.

"This is indeed a great day in Alabama," an upbeat Gov. Kay Ivey said Wednesday, flanked by company executives at a news conference in the state capital, Montgomery. Alabama offered an incentive package worth more than $379 million to lure the plant.

Toyota and Mazda will join Mercedes, Honda and Hyundai which currently operate assembly plants in Alabama.

"This project will really put Alabama at the centre of the Southern automotive industry," Alabama Commerce Secretary Greg Canfield said. "We can't wait to see 'Made in Alabama' in those vehicles rolling down the assembly line."

Alabama was already tied with Tennessee as the fifth-largest producer of vehicles in the U.S. last year, according to the Center for Automotive Research, an industry think-tank in Ann Arbor, Michigan. The state produced 9 per cent of the cars made in the country, the centre said.

President Donald Trump congratulated the state on Twitter Wednesday evening in a post that said, "Good news: Toyota and Mazda announce giant new Huntsville, Alabama, plant which will produce over 300,000 cars and SUV's a year and employ 4000 people. Companies are coming back to the U.S. in a very big way. Congratulations Alabama!"

Alabama started on the road to becoming an auto manufacturing hub in 1993 when Mercedes chose it as the location for a manufacturing plant after the state offered a then-eye popping $250 million incentive package.

Akio Toyoda, president of Toyota Motors, said Wednesday that the new facility is something of a homecoming since the company already has one plant in the state. The new Huntsville plant will be just 14 miles (22 kilometres) from Toyota Motor Manufacturing of Alabama, which produces four-cylinder, V-6 and V-8 engines for several Toyota models.

"Alabama won a first place trophy today in being selected for that plant," said Dave Sullivan, product analysis manager at AutoPacific Inc., an automotive research company. Sullivan said the factory itself is a huge asset for the state, but will also cause economic ripples by bringing spinoff jobs to suppliers and service companies in the area.

The decision to pick Alabama is another example of a long trend of foreign-based automakers building U.S. factories in the South. To entice manufacturers, Southern states have used a combination of lucrative incentive packages, low-cost labour and a pro-business labour environment since the United Auto Workers union is stronger in Northern states.

To lure the plant, Alabama offered an incentive package of $379 million in tax abatements, investment rebates and the construction of a worker training facility. The total price tag could top $400 million when road projects and local incentives are added.

Canfield, who said he had hopefully waited for the decision with a chilling bottle of champagne, said he believed the state is getting a "pretty good deal" considering the plant will create $5.2 billion over 20 years.

"Not only that, it's really hard to measure the positive impact that having companies create career opportunities like this and how that transforms families," Canfield said.

The announcement comes at a time that U.S. sales of small cars fell nearly 10 per cent last year as buyers continued a massive shift toward SUVs and pickup trucks. Corolla sales fell 14 per cent for the year, to just less than 309,000, according to Autodata Corp.

Still, Toyota and Mazda have said their collaboration will respect mutual independence and equality. Toyota, which makes the Prius hybrid, Camry sedan and Lexus luxury models, already provides hybrid technology to Mazda, which makes compact cars for Toyota at its Mexico plant.

The sheer cost of the plant also makes a partnership logical, as it boosts cost-efficiency and economies of scale. Working together on green and other auto technology also makes sense as the segment becomes increasingly competitive because of concerns about global warming, the environment and safety.

AP Auto Writer Tom Krisher contributed to this story from Detroit, Michigan