Japan defends Toyota after Trump broadside over Mexican plant

[January 06, 2017]  By Thomas Wilson

TOKYO (Reuters) - The Japanese government defended Toyota Motor Corp <7203.T> on Friday as an "important corporate citizen" of the United States, after President-elect Donald Trump singled out the automaker and threatened to slap punitive tariffs on its Mexico-built cars.

Trump has repeatedly hit out at U.S. companies for using lower-cost factories abroad at the expense of jobs at home. He has slammed U.S. automakers, including Ford <F.N> which this week scrapped a planned $1.6 billion Mexico plant.

But the attack overnight on Toyota is his first against a foreign automaker. "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax," Trump tweeted.

Toyota shares fell more than 3 percent before recovering, and Honda Motor Co <7267.T> and Nissan Motor Co <7201.T> slid around 2 percent - even as the government and analysts sought to brush off the impact of the attack.

Chief Cabinet Secretary Yoshihide Suga told reporters on Friday that Toyota was an "important corporate citizen", while Trade Minister Hiroshige Seko stressed the contribution of Japanese companies to U.S. employment.

"We think the impact on business performance is limited," Akira Kishimoto, a senior analyst at JP Morgan, said in a note.

"A cool judgement is needed."

Toyota's exposure to Mexico is limited, Kishimoto said, adding that even an "extreme case" tariff of 20 percent would hit its operating profit by around 6 percent. Trump has threatened a 35 percent tariff on cars imported from Mexico.

Toyota is just one of a host of companies operating in Mexico. It has an assembly plant in Baja California, where it produces the Tacoma pick-up truck, and where it could increase production.

Trump's tweet, however, confused Toyota's existing Baja plant with the planned $1 billion plant in Guanajuato, where construction got under way in November, days after the election.

A Toyota logo is seen on media day at the Mondial de l'Automobile, the Paris auto show, in Paris, France, September 29, 2016. REUTERS/Jacky Naegelen/File Photo

The Guanajuato plant will build Corollas and have an annual capacity of 200,000 when it comes online in 2019, shifting production of the small car from Canada.

Baja produces around 100,000 pick-up trucks and truck beds annually. Toyota said in September it would increase output of pick-up trucks by more than 60,000 units annually.

Other Japanese automakers and suppliers in Mexico include Nissan, which has been in Mexico for decades after choosing it as the site for its first assembly plant outside Asia. Nissan has two facilities there, producing 830,000 units in the year to March 2016.

Honda operates two assembly and engine plants with a total annual capacity of 263,000 vehicles, and a transmission plant with an annual capacity of 350,000 units.

Aisin Seiki Co <7259.T> and Denso Corp <6902.T>, both suppliers to Toyota and other carmakers, have two and three plants, respectively, in Mexico. Parts makers tend to cluster near assembly plants under the industry's "just-in-time" production philosophy.

(Reporting by Thomas Wilson and Ayai Tomisawa, additional reporting by Naomi Tajitsu and Kaori Kaneko; Editing by Clara Ferreira-Marques and Himani Sarkar)

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