Toyota Plans a $413m Upgrade to Kentucky Plant

By: Lauren Woods

The Toyota Motor Corp. is planning a $413 million upgrade to its Georgetown, Kentucky plant. The plan is intended to boost the production capacity and efficiency. The automaker also plans to add a model to the Camry, Avalon and Solara vehicles in said the plant.

The Kentucky Economic Development Finance Authority gave preliminary approval for $25 million in economic incentives for the work. Toyota has about 7,000 employees at the Georgetown factory, but spokesman Rick Hesterberg said the upgrades would not result in any new jobs. Hesterberg added that the money would be invested in the assembly and production areas. He declined to discuss the new vehicle being considered for the plant.

Catherine Madden, a senior automotive analyst for market-research firm Global Insight near Boston, said that she expects the new vehicle will be a midsized sport-touring wagon which is quite similar to the Matrix but larger. Madden added the plant would be a logical choice for the new model because the frame would be based on the Toyota Camry. She said about 80,000 of the vehicles would be made each year.

Some of the Toyota Camry production at Georgetown could be shifted to a plant in Lafayette, Indiana, to free up room, Madden added. "This is the beauty of what the Toyota system is supposed to do," she said of Toyota's ability to shift work between plants and produce manifold models based on the same welding points and architecture.

The automaker, known for its refined auto parts which could be compared to the quality of , has invested $5.5 billion in its Georgetown plant. It expected to produce about 352,000 Camrys, 93,000 Avalons and 48,000 Solaras in Georgetown in the previous year. The target came along with approximately 500,000 six-cylinder and four-cylinder engines.

Madden noted a possible name for the new wagon is the Ace. That name is being used for a vehicle sold in Japan, but she said the American wagon would be completely different. Hesterberg said that Toyota does not comment on details of upcoming models. He added, "A final decision about the new vehicle has not been made and Georgetown is not the only location in the running."

Under the company's agreement with the state, employment at the Georgetown plant could actually decrease to 6,750 in 2008-09, then to 6,466 in 2010-2013 and to 6,253 in 2014-17. Hesterberg said those guidelines reflect the minimum number of jobs the plant must have to receive state incentives, and he said there are no plans to reduce the size of the work force. Almost 1,000 temporary workers are employed at the plant through a staffing agency.

Gene Fuqua, the acting secretary of the Kentucky Cabinet for Economic Development, said that the program has only been used a few times. "We don't get $400 million investments very often," he said in an interview. "No question, there's a lot of spinoff from this."

The proposed tax breaks fall under the Kentucky Reinvestment Act. The latter offers incentives to companies with at least 1,000 employees that make significant upgrades even if they are not adding jobs. A copy of the agreement between the state and Toyota stated that the work is estimated to be completed in late 2008.

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