Toyota Braces For Tough Times

Georgetown, Ky., is home to Toyota's biggest plant outside of Japan. Southern state subsidies and a nonunion work force have contributed to Japanese carmakers' growth. But Toyota's sales are now down and a sudden collapse of the U.S. carmakers could hurt them, too.

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MELISSA BLOCK, host:

Whenever you're talking about the American auto industry, here's what someone's sure to say: For the Detroit Three to compete, they've got to be more like Toyota. Well, look at the foreign-owned plants in the American South. They've got low production costs and no unions to deal with; just what Detroit needs. Well, as NPR's Martin Kaste found out, it's not all sweet tea and magnolia blossoms for the foreign carmakers in the South. They have problems of their own.

MARTIN KASTE: Rick Hesterberg gives a lot of tours here at the enormous Toyota plant in Georgetown, Kentucky.

(Soundbite of door opening)

KASTE: It's usually a little more exciting here, Hesterberg says.

Mr. RICK HESTERBERG (Spokesman, Toyota Motor Manufacturing, Kentucky, Inc.): In the normal situation, you know, you would see - this mimics an actual city. We have traffic lights. You see tuggers, forklifts delivering parts line side.

KASTE: And right now?

Mr. HESTERBERG: Right now, it's idle.

KASTE: Idle because Toyota saw a 37-percent drop in sales last month. So, management extended the Christmas break by a week. The effect is spooky; a building the size of 150 football fields with the lights off. In the gloom, half-built Camrys sit waiting for the assembly line to start up again, and when it does next week, it'll be moving more slowly than usual. At the elevator, we meet the Toyota executive who is in charge here.

Mr. STEVE ST. ANGELO (President, Toyota Motor Manufacturing, Kentucky, Inc.; Senior Vice President, Toyota Motor Engineering & Manufacturing, North America, Inc.) I have had my nose broken three times.

(Soundbite of laughter)

KASTE: Steve St. Angelo is a hockey player, and today, he's limping.

Mr. ST. ANGELO: Yeah, I have to have fun, and one-hour hockey, that's a heck of workout.

KASTE: The hockey stick in his office also signals his Michigan roots. He worked at GM for 30 years before coming to Toyota's outpost here in horse country, and that background of his makes him unwilling to gloat over what's going on back in Detroit.

Mr. ST. ANGELO: I have many relatives still work at Ford Motor Company. You have a feeling - it's kind of an empty feeling; you want them to succeed; you want all of us to succeed. We're all Americans.

KASTE: St. Angelo seems oddly eager to talk about Toyota's troubles. It's almost as if the company doesn't want to be seen right now as capitalizing on Detroit's pain. In fact, St. Angelo says seeing the Big Three begging for government help last month made him think about his own position.

Mr. ST. ANGELO: I kind of drifted in a thought process of - that I'm the captain of the ship. And this ship happens to be the Titanic, but not Titanic I, but this is Titanic II. And I am getting ready to take this ship through the same waters, and that same iceberg is still there.

KASTE: Of course, Toyota is in better shape. It doesn't have anywhere near the same debt load as the American companies, but it still faces some dangers. For instance, what happens if one of the Big Three does goes under?

Mr. PAUL BLUE (Owner, Perfection Components, LLC): I think that would send a huge ripple through the industry.

KASTE: Paul Blue owns Perfection Components, one of the hundreds of small auto-parts makers that dot the countryside here in central Kentucky. He molds plastic.

(Soundbite of plastic-molding machine)

KASTE: This machine just pressed out the cover for the shifter on a Mitsubishi. These days, most of Blue's business goes to Toyota, and he's glad of that. But he says Detroit's trouble still affect him. The Big Three are dragging down some of his suppliers. When one goes under, he has to scramble to find a new source of chrome or plastic, you name it. The bigger parts companies, he says, have it even worse.

Mr. BLUE: We are constantly dealing with some company that's either on the brink or has filed already or is going in that direction.

KASTE: Toyota is well aware that a Detroit bankruptcy might tear a hole in America's web of auto-supply companies. It's keeping a watch list of suppliers in trouble and even lending Toyota managers to some of them to help keep things running.

So, should the Southern auto industry worry about a Big Three bankruptcy?

Dr. KENNETH TROSKE (Economics, University of Kentucky): Short term I think that would cause some serious pain.

KASTE: But long term, says University of Kentucky economist Ken Troske, a Big Three bankruptcy would be good, because it would hasten what he sees as the industries inevitable march toward the Southern model of lower labor costs.

Dr. TROSKE: Whether there is a union presence, I don't know, but it would a less powerful union. I think wages, real wages of those workers, would probably be lower. We've been moving in this direction for 40 years, and at some point, we're going to get there.

KASTE: Back at the Toyota plant, Steve St. Angelo is focused on getting his operation through this recession, and he has become obsessed with cutting costs. He'll talk your ear off about how much his staff is saving on colored copies, and when we visit the idled assembly line, he warns his public-relations guy not to turn on any lights. St. Angelo actually seems excited about the chance to make his plant more Spartan.

Mr. ST. ANGELO: If we use the creativity of all our members to identify ways to eliminate waste, we're going to come of this pretty powerful.

KASTE: That's probably Toyota's American competitors, those that survive, are afraid of. Martin Kaste, NPR News.

(Soundbite of music)

BLOCK: You're listening to All Things Considered from NPR News.

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