Thursday, October 6, 2005

Saab SUV production scrapped for Lafayette auto plant

Associated Press

Comment on this story Send this story to a friend Get Home Delivery

LAFAYETTE, Ind. -- A Japanese car manufacturing deal will scuttle plans to build a Saab crossover sports utility vehicle in Indiana, but it could pave the way for production of Toyota's popular hybrid cars at the Subaru plant in Lafayette.

"The market is crying for these hybrid vehicles," said Thad Malesh, head of Automotive Technology Research Group in Los Angeles. "Here you have a facility that is not very heavily utilized. In a short period of time, they could have it ramped up and have a high increase in hybrid production."

In an agreement announced Wednesday, General Motors Corp., which owns Saab, said it would sell its 20 percent stake in Fuji Heavy Industries, which makes Subaru vehicles. Toyota will buy an 8.7 percent stake in Fuji from GM for about $315 million.

In Indiana, the Saab crossover product had been slated to begin production in 2007, bringing with it new jobs at the 2,300-employee Lafayette plant.

But experts said the deal could still benefit workers in Indiana.

"One door closes and another opens," said Michael Robinet, vice president of global vehicle forecasts with CSM Worldwide, a Michigan-based auto industry research and consulting firm.

The Lafayette plant began production of Subaru and Isuzu vehicles in 1989. The plant is expected to make about 120,000 Subaru models this year -- less than half of its capacity under an air-quality permit.

Indiana economic development officials have been hoping to create a hybrid automobile industry in the state. In August, Gov. Mitch Daniels and other state officials met with Toyota executives in Japan to promote the state's plants for hybrid manufacturing.

Hybrid sales have nearly doubled in the United States during the past year as gas prices continue to soar. Since 2000, the U.S. hybrid market has increased nearly tenfold. By 2015, experts predict hybrids could account for 35 percent of U.S. car sales.

Toyota officials, however, declined to comment about a possible move of hybrid assembly lines to Lafayette.

"We did this deal basically to increase and mutually combine our resources in the areas of research and development," said Steve Curtis, manager of investor relations and communications at Toyota Motor North America. "It's difficult to offer any more perspective other than what we've disclosed."

Tom Easterday, senior vice president at Subaru of Indiana Automotive, said that workers at the plant are on track to make a "world version" for Subaru's B9 Tribeca for Japanese, European and Australian drivers in 2006.