UPDATE: Confirmed, Alabama picked for new $1.6B Toyota Mazda plant

DETROIT — Japanese automakers Toyota and Mazda have announced plans to build a huge $1.6 billion joint-venture auto plant in Alabama that will eventually employ about 4,000 people.

Several states had competed for the coveted project, which will be able to turn out 300,000 vehicles per year and will produce the Toyota Corolla compact car for North America and a new small SUV from Mazda. Alabama Gov. Kay Ivey and company executives announced that the facility is coming to the Huntsville area in the state’s northern area not far from the Tennessee line.

“Thank you for choosing Alabama. ”Thank you for believing in the potential of our people in the great state of Alabama,“ Ivey said. ”Welcome to sweet home Alabama.“

Akio Toyoda, president of Toyota Motors, said the announcement is something of a homecoming for the company. The site for the new plant will be in Huntsville and located just 14 miles (22 kilometres) from Toyota Motor Manufacturing of Alabama, which produces four-cylinder, V-6 and V-8 engines for several Toyota models.

Production is expected to begin by 2021.

The decision to pick Alabama is another example of foreign-based automakers building U.S. factories in the South.

To entice manufacturers, Southern states have used a combination of lucrative incentive packages, low-cost labour and a pro-business labour environment since the United Auto Workers union is stronger in Northern states.

Alabama was tied with Tennessee as the fifth-largest producer of vehicles in the country last year, according to the Center for Automotive Research, an industry think-tank in Ann Arbor, Michigan. The state produced 9 per cent of the cars made in the U.S., the centre said.

“Alabama won a first place trophy today in being selected for that plant,” said Dave Sullivan, product analysis manager at AutoPacific Inc., an automotive research company. Sullivan said the factory itself is a huge asset for the state, but it will also cause economic ripples by bringing spinoff jobs at suppliers and service companies in the area.

U.S. sales of small cars fell nearly 10 per cent last year as buyers continued a massive shift toward SUVs and pickup trucks. Corolla sales fell 14 per cent for the year, to just under 309,000, according to Autodata Corp.

Still, Toyota and Mazda have said their collaboration will respect mutual independence and equality. Toyota, which makes the Prius hybrid, Camry sedan and Lexus luxury models, already provides hybrid technology to Mazda, which makes compact cars for Toyota at its Mexico plant.

The sheer cost of the plant also makes a partnership logical, as it boosts cost-efficiency and economies of scale. Working together on green and other auto technology also makes sense as the segment becomes increasingly competitive because of concerns about global warming, the environment and safety.

Alabama started on the road to becoming an auto manufacturing hub in 1993 when Mercedes chose it as the location for a manufacturing plant after the state offered a then-eye popping $250 million incentive package. Honda and Toyota followed by putting engine plants in the state. In 2002, Hyundai announced an assembly facility in Montgomery.