Toyoda’s team fast-tracked Lexus move

Georgetown plant will build ES in 2015 By Hans Greimel

NEW YORK — A year ago Toyota Motor Corp. executives in Japan questioned whether their U.S. factories could meet the exacting standards required to build Lexus vehicles.

But then President Akio Toyoda, a self-professed America-lover, overhauled his top management last month, giving Americans greater clout for regional operations.

North America CEO Jim Lentz and Lexus International Executive Vice President Mark Templin fast-tracked plans to shift Lexus ES production to Toyota’s Georgetown, Ky., plant from Japan. Now 50,000 units of the ES will be built in Kentucky starting in 2015.

“The first decision they made, in less than one month, is to bring production of a Lexus model to the United States,” Toyoda said at a press conference here on Friday. “By having them in the top leadership here in the United States, it accelerated this very natural decision.”

For more than a year, Toyota had conducted a feasibility study on local production of the ES sedan, which is the second-best selling Lexus in the United States. But the North American team made its formal pitch to the Japanese top brass in Toyota City just 30 days ago — and, amazingly, won snap approval, Lentz said. The overall investment totals more than half a billion dollars.

“We brought all the information and said it was time to move,” Lentz said. “By Toyota standards, that’s a very quick decision to make this kind of investment.”

Toyota will spend $360 million on a new dedicated Lexus section at Georgetown, with a separate assembly line, paint shop and body shop. Toyota will invest another $170 million in general upgrades to the Georgetown complex.

The speed and potential impact of the decision underscore the efficacy of Toyoda’s push to streamline decision making and put power in local hands. Toyoda sees the move as a way to build cars better suited to local tastes and as a hedge against swings in currency rates that can erase profits on exports from Japan.

Toyota’s U.S. operations took the lead in exercising the added authority in part because Toyoda himself is so comfortable with the region and trusting of its leaders. He got his M.B.A. at Babson College near Boston and cut his teeth at New United Motor Manufacturing Inc., a now-defunct joint venture between General Motors and Toyota that built cars in Fremont, Calif.

“I have a special place in my heart for America, its people,” he said before opening last Friday’s press conference with a moment of silence for those killed in the Boston Marathon bombing.

The ES will be the first Lexus nameplate built in the United States and only the second built outside Japan. Toyota began manufacturing the Lexus RX crossover in Cambridge, Ontario, in 2003.

The RX is the top-selling Lexus in North America. In 2012 Lexus sold 95,381 units of the RX in the United States.

The ES, which was redesigned last year, was the No. 2 seller, with U.S. sales of 56,158.

The ES is currently built at Toyota’s Kyushu plant.

Just last year, Kazuo Ohara, then deputy chief officer for Lexus, said some in Japan still doubted whether U.S. factories were up to the task of building the luxury cars to the same standards as plants in Japan.

“It’s the quality,” Ohara said. “We need some training to build Lexusquality vehicles. For Canada, it took several years to catch up to the Kyushu level of quality.” But he conceded Toyota was under increasing pressure to build more vehicles outside Japan as a hedge against currency swings.

Today, Toyota executives say they are satisfied on the quality front. “Our Kentucky plant has made dedicated efforts to be able to produce Lexus-quality products,” Toyoda said. “Kentucky has now grown into a very competitive plant worldwide.” Lexus will still need to import the ES from Japan. Sales of all versions of the ES in the United States and Canada totaled about 60,000 last year, and are projected at 75,000 this year.

The Kyushu plant will keep making the ES 250, ES 300h hybrid and ES 350.c