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Toyota and Rival Mazda Could Be About to Build a $1.6 Billion Assembly Plant in U.S.

Tomohiro OhsumiToyota Motor Co. Plans To Cut Most Internal-Combustion Engines By 2050Tomohiro OhsumiToyota Motor Co. Plans To Cut Most Internal-Combustion Engines By 2050
A Toyota worker on the production line of the company's Motomachi plant in Toyota City, Aichi, Japan, Oct. 13, 2016. Tomohiro Ohsumi—Bloomberg/Getty Images

Toyota Motor (TM) and rival Mazda Motor (MZDAY) are expected to announce plans on Friday to build a $1.6 billion U.S assembly plant as part of a new joint venture, a person briefed on the matter said.

The plant will be capable of producing 300,000 vehicles a year, with production divided between the two automakers, and employ about 4,000 people when it opens in 2021, the person said on Thursday.

A new auto plant would be a major boost to U.S. President Donald Trump, who campaigned on promises to boost manufacturing and expand employment for American autoworkers.

The source, who was not authorized to speak to the media and requested anonymity, said the plant in a yet to be determined U.S. location was expected to build Toyota Corolla cars and a Mazda crossover utility vehicle.

Japan’s Nikkei reported earlier on Thursday that Toyota would take a roughly 5% stake in Mazda Motor Corp to develop key electric vehicle technologies and jointly build a factory in the United States.

The source who spoke to Reuters confirmed the Japanese carmakers planned future joint efforts on electric vehicles.

Toyota, in a statement, said the two companies have been exploring various areas of collaboration under a May 2015 agreement.

“We intend to submit a proposal to our board of directors today regarding the partnership with Mazda, however, we would like to refrain from providing further comment at this time,” Toyota said in a statement issued by its U.S. operations.

Mazda said in statement that “nothing has been decided yet” and added the company “will have a board meeting on this matter today. We cannot comment any further.”

Toyota, the world’s second largest automaker by vehicle sales in 2016 and Japan’s dominant car company, has been forging alliances with smaller Japanese rivals for several years, effectively consolidating the Japanese auto sector.

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A new U.S. assembly plant would likely become the prize in a fierce competition among Midwestern and Southern states eager to expand manufacturing jobs.

The new U.S. plant comes demand for cars has fallen sharply. Toyota’s U.S. Corolla sales are down nearly 9% this year.

In North America, Toyota builds Corolla cars in Canada and Mississippi and announced plans in 2015 to shift Canadian Corolla production to a new $1 billion plant in Mexico.

Trump in January criticized Toyota for importing cars to the United States from Mexico. The Republican president also threatened to impose a hefty fee on Toyota if it were to build Corolla cars for the U.S. market at a plant in Mexico.

“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 said in a post on Twitter.

But since January, Trump has praised Toyota for its U.S. investments. Toyota said in January it plans to invest $10 billion in the United States over the next five years to meet demand.

Last month, Trump complimented Toyota for completing its long-planned new North American headquarters in Texas.

“We want to be the car capital of the world once again and we are taking steps to achieve that goal,” Trump wrote.

The White House declined to comment on the Toyota-Mazda joint venture.