Toyota Motor Corp., demonstrating growing faith in the economic rebound, will boost production by one-third and hire 400 workers at its Woodstock, Ont., vehicle assembly plant, the auto maker's third such increase at a North American facility in two months.
An $80-million investment to raise output of RAV4 crossovers to 200,000 annually from 150,000 follows similar moves to expand production at plants in Indiana and Mississippi as the natural disasters of 2011 and the recall crisis of 2010 fade in the Japan-based company's rearview mirror.
"We are optimistic that the market is coming back," Toyota Motor Manufacturing Canada Inc. chairman Ray Tanguay said Wednesday.
The expansion is the latest sign that the recovery in U.S. and Canadian vehicle sales is gaining strength and is also a positive boost for the Ontario manufacturing sector, which has shed thousands of jobs as companies wrestle with globalization and the surge in the Canadian dollar.
It's the first major increase in assembly jobs in Canada this year, following announcements by several auto makers of production increases at their U.S. and Mexican operations.
Senior industry executives are growing more bullish and analysts have been raising their forecasts for U.S. sales this year, amid improving macroeconomic fundamentals, growing consumer confidence and drivers' need to trade in older vehicles for newer, fuel-efficient models as gas prices jump close to record high levels.
There's pent-up demand for RAV4 crossovers after the earthquake and tsunami in Japan and flooding in Thailand led to parts shortages and curtailed production in Woodstock last year, said Brian Krinock, Toyota Motor Canada's president.
"We can't make enough of them right now," Mr. Krinock said. The RAV4 is the fourth-best-selling model in Toyota's U.S. lineup. It's the No. 2 selling vehicle for Toyota Canada Inc.
While the expansions at the three North American plants are driven mainly by the market recovery, the surge in the value of the yen is also playing a role. All production of Highlander crossovers, for example, is being shifted to the Indiana plant.
But Toyota made an informal commitment to the Japanese government to maintain a certain level of production in Japan, "so they cannot simply move jobs wholesale out of Japan, regardless of the economics," said Jeffrey Liker, a University of Michigan professor who has written several books on the company.
Toyota North America president Yoshimi Inaba said in Toronto last month that assembling the popular Prius hybrid sedan in North America and adding more models for the Lexus lineup beyond the RX350 assembled at Toyota Motor Canada's Cambridge, Ont., plant are other options being considered.
"The exchange rate plays a very important role in our business decisions; that's why we are considering all the possible scenarios of trying to mitigate the impact," Mr. Inaba said.
The Woodstock announcement comes nine months after the federal and Ontario governments provided $500-million worth of financial assistance to Toyota Motor Canada to upgrade the two factories and ensure that Woodstock would also be the site where the electric version of the RAV4 is assembled.
The capacity increases in Woodstock and Indiana will take effect in early 2013. Employment in Woodstock will rise to 2,400 people from 2,000. The two plants now employ about 6,500 people.
In addition to the Lexus model, the Cambridge plant also assembles Corolla and Matrix compacts.
The Mississippi plant, which also assembles Corollas, added a second shift of production earlier this year.
In another piece of good news for Canadian jobs, Canadian Auto Workers union officials in Windsor, Ont., said Ford Motor Co. will recall about 100 workers from layoff next month to begin a third shift at the Essex Engine plant in that city.