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Toyota to produce luxury Lexus model at Ky. plant

Thursday - 4/18/2013, 6:20pm  ET

TOM KRISHER
Associated Press

FRANKFORT, Ky. (AP) -- Toyota is preparing to announce a decision to produce a luxury Lexus model in Kentucky, a move that would create an additional 750 jobs, pushing employment at its Georgetown plant past 6,700 workers.

The automaker has scheduled simultaneous news conferences for Friday morning at the Georgetown factory and in New York to announce the plan.

Speakers at the New York event include Toyota Motor Corp. President Akio Toyoda, the company's top executive, and Jim Lentz, CEO of the North American region.

The company also plans to hold a marketing event Friday night in New York for its Lexus luxury brand, fueling speculation that it plans to transfer production of a Lexus model from Japan to Kentucky.

Government officials who have been briefed by Toyota executives confirmed the carmaker's decision to produce the Lexus in Kentucky. The officials spoke on the condition of anonymity because Toyota wanted to wait until the Friday event to announce the decision.

In an interview with The Associated Press last month, Lentz said Toyota studies sales trends for each particular model series and will add North American factory capacity when necessary.

"If we get to a point where we're forecasting greater demand than there is capacity, depending on what series it might be in, we would raise our hand to build that increased capacity here in North America," he said.

The Lexus ES series fits that description. Sales of the midsize luxury cars, which are offered in conventional and gas-electric hybrid versions, have nearly doubled so far this year compared with 2012. Last year, ES sales rose 37 percent. Toyota sold just over 56,000 ES models in the U.S. last year, about the amount that the addition to the Kentucky plant will be able to produce.

Lentz said Toyota would continue to move production to North America as a hedge against fluctuations in the value of the yen versus the dollar. The company now builds in North America roughly 70 percent of the cars and trucks it sells in the region, he said.

The strong yen had caused Japanese automakers to produce more cars in North America. But recently the yen has weakened against the U.S. dollar, helping Japanese exporters. Lentz said the weaker yen is short term, and Toyota's broader strategy is to build where it sells.

"It's difficult for a manufacturer to know where currency is going to be at any point and time in the future," he said. "So whether the yen is moving up or whether the yen is moving down, we're going to be in a good position in the U.S. because a vast majority of our business is done in dollars. I think what you'll see is even more investment in the U.S."

Kentucky Gov. Steve Beshear is among a long list of dignitaries who have been invited to the Georgetown event Friday, two days after the state approved a tax incentive package for the automaker. Invitees haven't been given specifics about the pending announcement.

However, Beshear's staffers said in a press advisory that he would make a "major economic development announcement" at the Toyota plant.

The Kentucky Economic Development Finance Authority approved $146.5 million in state tax incentives on Wednesday to help with the cost of the proposed $531 million expansion.

"Securing this significant investment at Toyota Motor Manufacturing Kentucky would be a huge economic development victory," said Mandy Lambert, spokeswoman for the Kentucky Economic Development Cabinet. "It would not only bring new jobs and capital investment to the state, but would greatly enhance Kentucky's already strong reputation as a leader in the auto industry."

The Georgetown plant, which already has 6,100 full-time workers, competed against other Toyota factories for the opportunity to build the Lexus.

Toyota already produces the Camry, Camry Hybrid, Avalon and Venza as well as engines and other vehicle components at the Georgetown plant. The state's tax incentives would kick in when employment at the plant reaches 6,739.

"We continue to look for opportunities to localize production and build where we sell," said Rick Hesterberg, spokesman for Toyota Engineering and Manufacturing, in a statement Wednesday.

According to details of the tax incentives outlined in government paperwork, Toyota is considering an expansion that would produce an additional 50,000 vehicles per year. The project would involve expanding and modifying existing buildings and would require replacement and refurbishment of equipment. The paperwork says the expansion would generate a total of 750 jobs, including 570 permanent full-time employees and 180 contract workers. Average compensation for the new jobs would be $26 an hour.

Kentucky is home to nearly 450 motor vehicle-related facilities, employing nearly 80,000 people.

Besides the Georgetown Toyota plant, Kentucky has two Ford plants in Louisville and a GM plant in Bowling Green where the Corvette is made.

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Krisher contributed to this report from Detroit.


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