Is Toyota's Kentucky investment a victory for Trump?

Toyota is investing $1.3bn to upgrade its massive Kentucky factory, the company announced on April 10, in Toyota’s biggest single investment at one of its existing US plants. With 8200 employees, the Georgetown factory is Toyota’s largest plant, producing nearly a quarter of all their US-made vehicles, such as the flagship Camry sedan.

The investment will create 700 jobs and the necessary production tools for Toyota’s revamped 2018 Camry, long the top-selling car in the US. It is part of the company’s “plan to invest $10bn in the US over the next five years”, said Toyota North America CEO Jim Lentz.

Rhetorical victories

Praising the investment, US president Donald Trump called it “further evidence that manufactures are now confident that the economic climate has greatly improved under my administration and it echoes the recent National Association of Manufacturers’ 2017 Outlook Survey showing that 93% of manufacturers are now optimistic, which is an increase of 37% from just a few months ago”.

The above presidential statement was first announced in Toyota’s recent press release, at the company’s request. Toyota has touted its accolade of having its Camry named the Cars.com ‘Most American Made Car’, and through infographics at the 2017 Detroit auto show, made quite a show of its history of US investment.

The Kentucky investment is a marketing opportunity for both Toyota and Mr Trump: a ‘political victory’ for the latter and, for Toyota, evidence of its ‘commitment to America’, thereby sweetening the company’s previously rattled relationship with the US administration.

In January 2017, Mr Trump criticised Toyota’s Mexican manufacturing expansion plans, tweeting “NO WAY! Build plant in US or pay big border tax.” However, his threat has changed little for Toyota in real terms. The company has gone ahead with its Mexican expansion and the Kentucky upgrade has been years in the making, according to the Associated Press.

Less benefit

Moreover, automotive FDI in Kentucky or Alabama – traditional Republican heartlands – is far less beneficial for Mr Trump than FDI into Michigan and Ohio, whose manufacturing industries have floundered and whose Republican support cannot be taken for granted.

Aside from this, Toyota’s latest investment has helped seal Kentucky’s reputation for world-class automotive production and the US as one of the top destinations for auto investment. In 2015-16, the country received $6.074bn, second only to Mexico, according to greenfield investment tracker fDi Markets.

Contrary to popular perception, FDI in US manufacturing rose at an average rate of 9% per year over the past decade, according to the US Bureau of Economic Analysis.