Toyota has resumed production of its Tundra trucks at its San Antonio plant after a suspension of three months. (Michael Stravato for The New York Times)

Foreign automakers in the U.S. cut back

By Clifford Krauss

Published: December 23, 2008

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SAN ANTONIO, Texas: Sales are off and production is down, so workers at the Toyota Tundra truck factory here are taking classes: how to handle tools safely, how to get along better with colleagues of varying backgrounds. Some have even cleaned local parks and fed the hungry while collecting Toyota paychecks.

"We'd rather be building trucks," said Mike Goss, a Toyota spokesman. "I'm trying to imagine how many trucks we would be selling, with gas prices where they are now, if people were spending money."

But people are not spending money these days, and sales of the Tundra and other Toyota vehicles have hit a wall. The sales slowdown, and some of the accompanying business problems, that have engulfed the Detroit automobile makers are rapidly spreading to the world's strongest auto companies. To cope, Toyota, Honda, Nissan and Hyundai are all slowing American production, and many foreign auto companies are putting off plant expansions.

For the most part, the so-called auto transplants — foreign-owned car companies with major operations in the United States — have deep pockets and ample credit, and they are not facing potential bankruptcy like General Motors and Chrysler.

But none of the foreign companies have proved any better than the Detroit Three at predicting how gasoline prices would gyrate or the extent to which demand for cars and trucks would collapse in a deepening recession.

"The transplants are facing many of the same constraints that the domestics are facing: excess capacity, especially for light trucks like SUV's and pickup trucks," said Rebecca Lindland, an auto analyst at IHS Global Insight, a forecasting company. "The difference is that this is the first time they have faced these kinds of issues. It's sort of a whole new world for them."

The big question is how long the transplants can, or will, keep factories like the one in San Antonio, Texas, operating at a snail's pace without laying off full-time workers. So far the companies have fired only temporary workers, but the future is clouded by the potential depth of the recession.

"The worst-case scenario is the current sales rate stays in place or gets worse for many years," said David Whiston, an auto analyst at Morningstar. "But that's stuff that is too scary to think about."

The tale of the Tundra and the San Antonio plant is part of a larger story of unprecedented juggling for Toyota, the biggest foreign car producer in the United States by far and a company long known for its skill in planning and execution. Until recently, the company had been struggling to keep up with demand in North America.

But only a year and a half after the plant opened in late 2006, gas prices soared to such heights that the pickup truck market crashed. As inventories of Tundras ballooned this summer, Toyota suspended production at the plant for three months. Now Tundras have begun rolling off the assembly line again, but with the economy reeling, even low gas prices have not revived sales.

The Tundra was originally meant to be made here and at a plant in Indiana. But as the truck market collapsed, Toyota decided to consolidate all its Tundra production in San Antonio and produce the Highlander SUV at the Indiana plant.

Toyota further changed course with a plant under construction outside Tupelo, Mississippi, that was supposed to build Highlanders, deciding to produce the Prius hybrid there instead. But last week, with sales of even the Prius falling in the face of the economic downturn, Toyota decided to delay completion of the Mississippi plant indefinitely.

"It tells you how drastic the change is in the economy and the auto industry," said Kirk Kohler, the San Antonio plant's general manager for administration and production control. "Even Toyota, which typically is very conservative and deliberative and makes decisions for the long term, even we did not see the change that was coming in the market."

Toyota executives say that the planning for the Texas and Mississippi plants happened at a time when sales of vehicles in the United States were 16 million a year. That number is falling and may drop below 12 million in 2009, meaning most of the big carmakers have too much production capacity.

Originally the Tundra was conceived as Toyota's answer for the profitable American heavy pickup truck market, long dominated by the Detroit companies. It was designed in the United States, after American Toyota executives worked for years to convince top Japanese executives that the heavy pickup truck market was a big sales opportunity, particularly in Texas, the South and the Southwest.