The malaise in the US car industry has captured the mighty Toyota, the world’s biggest and most profitable car company. It revealed overnight similar plans to restructure its north American businesses that Ford, General Motors and Chrysler have already revealed.

The move will mean that Toyota will almost certainly experience a drop in earnings in the US and worldwide: it is due to update markets later this month.

It is one of the more important moves by a major global carmaker. Besides these moves in the US we have seen Fiat reveal it will be shutting factories in Italy in coming months to slow production of all models because the country’s car industry has slumped; Renault of France is trimming its estimates of sales for the coming year, as is rival Peugeot-Citroen while the British car market fell another 6% in June, according to preliminary figures.

That will involve slashing output of big trucks or pick ups and sports utility vehicles and switching its emphasis back to its strength, making small to medium cars more profitably: included in this will be a factory to make the hard to get Toyota Prius hybrid in the US.

Toyota says it will stop production of big pick-up trucks and sport-utility vehicles in North America for three months from August to November and an assembly plant now under construction in Mississippi will be redesigned to build the popular Prius hybrid petrol-electric hatchback instead of the Highlander mid-size SUV. Almost all Priuses are currently built in Japan.

The moves are a direct response to the plunging sales of fuel-hungry pick-ups and SUVs in the US and follow plans by Ford, then GM and finally Chrysler to cut production, sell off stockpiles, close factories (at least five, perhaps seven between the big three) and to layoff thousands of employees later this year.

For Toyota the reversal is an embarrassment. It only launched its big Tundra pick-up early last year and built a plant in Texas for that model.

But like the experience of Ford with its pick up and SUVs, GM and Chrysler with its minivans, sales of the Tundra plunged by more than half in June compared with a year earlier. Toyota sold 76,500 Tundras in the June half, well short of its initial annual target of 200,000 models. Sales had been projected to rise to 300,000 a year.

And demand for the new Toyota Sequoia SUV, introduced nine months ago, was even lower: 30,000 compared to an annual target of 100,000. Toyota says Tundra production will be consolidated at the Texas plant from early next year. The truck has also been built at a second plant in the US, which will now stop.

Toyota says that “building the Prius factory to better respond to increased consumer demand for hybrid vehicles”. The Prius plant is due to come on stream in late 2010. Meanwhile, a new Prius model is due to be launched worldwide early next year. Toyota couldn’t supply enough Prius cars to US buyers in June with the curious effect that sales plunged as buyers sought other vehicles.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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