Toyota assembly plants in Southwestern Ontario will lose about 10 per cent of their total production, 50,000 vehicles a year, the second blow to the automotive sector here in recent months.
But Toyota Motor Manufacturing Canada is promising a silver lining, a new vehicle, the automaker announced on March 14.
The automaker with plants in Woodstock and Cambridge and about 8,000 workers said it will shift to Kentucky production of a RAV4 hybrid it was making here for sale in the U.S., following a US$749 million investment in the plant south of the border.
The Cambridge plant will continue to build hybrid RAV4s for sale in Canada, a small slice of the market since 50,000 RAV4 hybrids were sold in the U.S., but only 8,000 in Canada.
“Any decrease in production at a Canadian plant is concerning. We are losing an economic gain we would have had for the future,” said Juan Manuel Herrera, an economist and automotive analyst with Scotiabank.
“They have capacity at a plant (in Kentucky) and they want to keep operating in a cost-efficient way.”
Workers in both Cambridge and Woodstock were shocked by the news, since only 10 months ago Toyota announced a $1.4-billion investment in its Ontario plants, helped by $220 million in federal and provincial government funding, and the RAV4 hybrid was a big part of that news.
“We’ve lost the hybrid for the North American market,” said Lee Sperduti, team leader at the Cambridge plant.
“The only thing that matters is that we have volume, that we make a vehicle people want.”
General Motors recently announced the closing of its Oshawa assembly plant and the loss of about 3,000 jobs by the end of the year.
Toyota’s Woodstock and Cambridge plants will continue to make gasoline-powered RAV4s, as well as Lexus crossover vehicles, both gasoline and hybrid, for the North American market.
“It was a significant investment. It seems to me like a strange move to invest this much in a plant and then assemble it somewhere else,” Herrera said of Toyota’s recent moves.
But Toyota also is eyeing a new vehicle for the Ontario plants.
“Toyota is considering production of a new model in Canada and the company will make an announcement once this decision has been made,” said Michael Bouliane, a company spokesperson.
The automaker also announced employment at the plants will remain “stable.”
“We will start production of RAV4 hybrid vehicles in Canada from April 2019 as originally planned. As of 2020, RAV4 hybrid vehicles for the Canadian market and gasoline models (including for the U.S. market) will continue to be produced in Canada,” said Bouliane.
The Ontario plants will remain the largest producer of RAV4 vehicles for North American markets, he said.
That’s little comfort to Sperduti, as workers fear the sister plants in Southwestern Ontario could land a low-volume niche vehicle, compared to the RAV4 and Corolla, which used to be assembled there.
“The thing that concerns me is what is coming,” he said.
Toyota saying employment levels will remain “stable” also is little comfort to workers since a flood of coming retirements means there are fears employment will fall by attrition.
“They may not hire replacements. We will have a lot of retirements in about two years,” said Sperduti.
“We will build the car the best we can, but we want to make sure we have volume, and will make a car everyone wants. The RAV4 is what everyone wants. We need it to keep our employment levels.”
Toyota sold a total of 427,000 RAV4s in the U.S. last year, of which 174,000 were made in Ontario.
“It’s a huge seller,” said Herrera.
The Automotive News reported last Thursday that the Georgetown, Ky., plant will have capacity to build 100,000 RAV4 hybrids a year starting in January 2020.
The news comes as the automotive sector is cooling, after strong sales for about 10 years. In 2017, 17.1 million vehicles were sold in the U.S. Last year, that total was 17.2 million. This year sales are expected to slow to about 16.8 million vehicles, said Herrera, a decrease of 400,000 sales, or a two per cent drop.
Toyota’s plant in Georgetown, Ky., made the Venza, discontinued in 2017, and assembles the Camry, which has seen sales slow.
The Woodstock and Cambridge Toyota plants assemble about 500,000 vehicles a year.
It Woodstock plant began making the RAV4 hybrid only a few weeks ago. It assembled the Corolla, but that production was shifted to a plant in Mexico.
Toyota Motor Manufacturing Canada
- 500,000 vehicles a year
- About 8,000 workers
- Assemble the RAV4, gasoline and hybrid, and Lexus RX350, gasoline and hybrid
- Plants in Woodstock, RAV4 only and Cambridge, RAV4 and Lexus
- Recently lost production of the Corolla sedan to Mexico