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Toyota Motor Corp. said Thursday it will start selling the hybrid Prius and two other models in South Korea next year as it expands its offerings in the country beyond the luxury Lexus brand.

"It’s a big challenge for Toyota," Chairman Fujio Cho said of the decision to enter South Korea under the Toyota brand. The local market, which is dominated by domestic manufacturers including Hyundai Motor Co. and Kia Motors Corp., is "pretty tough," he said.

Toyota said it will begin selling the Prius, the Camry sedan in gasoline and hybrid versions, and the RAV4, a compact sport utility vehicle, during the second half of next year through a dealer network.

The world’s biggest automaker by production has set modest sales goals - initially targeting a total of 500 vehicles a month. It said, however, that it plans to quickly double sales to 1,000 vehicles a month.

Toyota has already had success with its Lexus brand, which it began selling in South Korea in 2001. Sales have risen every year, with 2007 the best to date at 7,520 vehicles.

That accounted for 14.1% of the imported car market, just behind Germany’s BMW at 14.3%, according to figures from the Korea Automobile Importers & Distributors Association.

Japan’s Nissan Motor Co. (NSANY), which markets its luxury Infiniti brand in South Korea, also plans to begin sales under the Nissan brand later this year credit scores. Mitsubishi Motors Corp. also has plans to enter the South Korean market.

Honda Motor Co. (HMC) sold 7,109 vehicles in South Korea last year, the third-largest total for foreign automakers.

Toyota previously sold the Camry and Avalon models in South Korea through a local sales agent from 1997 to 1999.

The company manufactured a record 9,497,754 vehicles worldwide in 2007, up 5.3% from the previous year, beating General Motors Corp. of the United States, which made 9.284 million.

Toyota, however, sold 9.366 million vehicles last year, about 3,000 fewer than its U.S. rival. GM (GM, Fortune 500) has been the world’s top-selling car company for 77 years.

Executive Vice President Tokuichi Uranishi said the strong Japanese yen, high costs for raw materials and slackening demand in major markets are casting a shadow over this year, for which Toyota has set an annual group sales goal of 9.85 million vehicles.

"Frankly speaking, the Japanese, U.S. and European markets are very soft … if the current situation continues I think that will be hard" to achieve, Uranishi said of the target.

Toyota (TM) hopes sales in emerging markets such as China and Russia will help cover weakness elsewhere, he said. 

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Manufacturing provides many Canadians with good jobs and the opportunity to develop high skills. Yet today, manufacturing is at risk. Several hundred thousand jobs have disappeared in recent years and things could get much worse. There are two reasons for this.

One is the increasing possibility of a difficult U.S. recession combined with a high dollar, which poses a serious threat to many small and mid-size manufacturers dependent on the U.S. market.

So here the question is what can federal and provincial governments do to help sustain manufacturing companies during what could be a long and deep U.S. slowdown?

The second challenge, which is more troubling, is the urgent need to adjust to deep structural changes in the world economy. Advances in technology and an intensifying race to bring new technologies to market is one dimension. Another is the entry of new competitors with abundant low-cost yet skilled workers, such as China and India, into the global economy.

New business models are emerging, based on global supply chains in which multinational corporations organize production by sourcing parts and components from companies around the world, based either on high-quality leading-edge technology or low costs. Canadian manufacturers can only compete with high-quality, leading-edge technologies.

While responding to the first challenge of surviving a recession is the current headline issue, the more troubling and pervasive challenge of structural change in response to new forms of competition is the more fundamental.

There is a temptation to write manufacturing off on the grounds that our natural resources and services industries can assure a healthy economy for all. But this would be a huge mistake.

Manufacturing does matter. It is easy to forget how pervasive manufactured products are in our lives. From food, clothing, shoes, furniture and building materials to pharmaceuticals, automobiles, aircraft, computers, TV sets, BlackBerries, chemicals, plastics and, for that matter, newspapers.

Today, many manufactured products have a high content of what we call intangibles – design, software, engineering, patents, marketing expertise, research and development bad credit payday loan. It is these activities that generate many of the good jobs in manufacturing. But for intangibles to have value, there ultimately has to be a manufactured product.

There’s also a tendency to see manufacturing as increasingly a developing world activity. While it is true that many products can be made more cheaply in the developing world, about 75 per cent of global manufacturing still takes place in the advanced economies, compared to about 10 per cent in China. And much of what China exports consists of high-value parts and components made in more advanced economies but assembled in China into a final product.

So it’s possible to have a healthy manufacturing industry in a high-cost country like Canada if it produces high-quality products.

Finally, there’s a tendency to overlook the reality that manufacturing affects all provinces. While Ontario is the centre of Canadian manufacturing, all provinces have manufacturing industries.

But a strategy to ensure a healthy manufacturing industry in Canada depends on close co-operation between governments at all levels.

For example, provinces want to help their smaller manufacturers participate in global supply chains. Federal foreign trade offices and the Export Development Corp. have roles to play. Provinces want to free up cash flow in businesses by allowing companies with unused investment tax credits to turn them into cash. Ottawa has to change its tax rules to do this.

Provinces want to see strategic investments to develop industry clusters and target promising technologies, as was possible under the old Technology Partnerships program. Ottawa has to overcome its resistance to direct support programs.

Unless we can get the federal and provincial governments aligned in support of an innovative manufacturing industry with good jobs, Canada will become a country with diminished prospects. Manufacturing matters.

David Crane’s column on Global Issues appears Sundays. He can be reached at crane@interlog.com.

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"Tall" and pricey is becoming "short" and cheap at the world’s largest gourmet coffee chain as it grapples with a cost-conscious consumer and competition from fast-food outlets.

Starbucks Corp. confirmed yesterday it is test marketing a smaller, cheaper $1 (U.S.) cup of coffee, as well as free refills, at some U.S. stores.

The chain that made millions selling high-priced designer brew said the new "short" coffee comes in an eight-ounce cup and is available at some Seattle outlets.

No decision has been made yet about bringing the product to Canada, a spokesperson for the company said yesterday.

Starbucks also said it frequently tests new products, but doesn’t comment on the results until it makes a final decision. The move is not indicative of any new business strategy, the company added.

However, it comes amid increased competition from low-priced fast-food outlets and signs that financially strapped U.S. consumers are "trading down" to cheaper retail outlets.

The gourmet chain grew to 15,000 stores worldwide mainly on the strength of large, customized brews that are priced accordingly.

But now cheaper chains, such as McDonald’s, have moved more aggressively into the category.

McDonald’s has plans to add coffee counters to as many as 14,000 U.S. locations.

The suggested retail price in the United States for a slightly larger 10-ounce cup of premium roast coffee at McDonald’s and Dunkin’ Donuts is $1.07 (U.S.) and $1.39, respectively, those companies said yesterday.

Shares in Starbucks lost nearly half their value last year as problems in the U.S payday loans. mortgage and credit markets dampened consumer spending.

The company also shuffled its senior management team, bringing back chair Howard Schultz as chief executive officer, and vowing to close underperforming stores and boost international expansion. Two-third of its outlets are in the United States.

In New York yesterday, the price of coffee fell on the futures market as many traders sold on fears the global economy is headed for a recession.

"Large hedge funds are saying, `Everything is going down – get me into cash,’" said Jaime Menahem, a broker with Alaron Trading Corp. in Miami. "There’s no confidence in the economy."

Coffee for March delivery fell 3.7 cents, or 2.7 per cent, to $1.313 a pound on ICE Futures U.S., formerly known as the New York Board of Trade. The price for coffee has dropped 3.6 per cent this month.

With files from the Star’s wire services

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European Central Bank President Jean- Claude Trichet said he's committed to fighting inflation, attempting to quash speculation he'll follow the U.S. Federal Reserve in cutting interest rates after stocks plunged.

“Particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility,'' Trichet told the European Parliament in Brussels today.

Bond investors dismissed his comments and raised bets on an ECB interest-rate cut. European two-year government notes rose the most since September 2001 and yields on June rate futures dropped as much as 21 basis points. The U.S. central bank cut its benchmark by three quarters of a percentage point to 3.5 percent yesterday after global stocks tumbled on concern a recession in the world's largest economy will curb global growth.

“Europe is not going to get special dispensation from a global slowdown,'' Stephen Roach, chairman of Morgan Stanley in Asia, said on a panel at the World Economic Forum in Davos, Switzerland. “Europe is not this dynamic, rapidly growing economy.''

Euro-region service industries grew this month at the slowest pace in more than four years after credit tightened and the euro neared a record, an industry report showed today.

Room for Maneuver?

Trichet on Jan. 10 threatened to raise the bank's key rate from 4 percent if unions push through wage increases that take the jump in inflation into account. Euro-region inflation was 3.1 percent in December, the fastest in six years and well above the ECB's 2 percent limit.

He suggested today that slowing growth may give the Frankfurt-based ECB more room for maneuver. While the bank is sticking to its base scenario that the economy of the 15 euro nations will expand about 2 percent this year, there are “downside'' risks to the outlook, Trichet said.

“We'll see how the real economy develops in the future because it can have an effect on inflation,'' he said.

That remark “suggests any cut in rates by the ECB will only come on the back of poor economic data,'' said James Nixon, an economist at Societe Generale in London. The Fed's “concerns of a credit crunch appear to be absent in Frankfurt, even though European bank stocks have been hit just as hard as in the U.S.''

European stocks extended declines. The Dow Jones Stoxx 600 Index shed 1.6 percent as of 3:20 p.m. in London, erasing yesterday's gain that was triggered by the Fed's cuts. The index has plunged 15 percent already this year cash advance flexible payments.

Summers Concerned

“The outlook for Europe is being revised downwards quite rapidly,'' former U.S. Treasury Secretary Lawrence Summers in a Bloomberg Television interview in Davos. “One has to be concerned about financial strains and what they bring in Europe.''

European bonds rallied on speculation the ECB will be forced to follow the Fed and cut interest rates. The yield on the two- year note fell as much as 24 basis points, the biggest decline since the day after the terrorist attacks of Sept. 11, 2001, and was at 3.22 percent at 2:49 p.m. in London.

“Trichet's warning about inflation risks today does not mean that he won't cut interest rates in three months,'' said Marco Kramer, co-head of European economics at UniCredit MIB in Munich. “It's only rhetoric to fight inflation expectations.''

BNP Paribas SA today said it now expects the ECB to lower its key rate to 3.75 percent in June rather than September. Barclays Capital said the central bank will reduce rates twice this year instead of keeping them unchanged.

`Difficult Year'

“We're already in a recession in the U.S.,'' Klaus Kleinfeld, chief operating officer at Alcoa Inc., the world's third-largest aluminum producer, said in Davos. “2008 will be a difficult year. I don't think that the world can decouple itself from what's happening in the U.S.''

Still, ECB council member Axel Weber said last night that any impact in Europe from a U.S. slowdown “could emerge with a time lag'' and may “be less strong than in former times.''

ECB Vice-President Lucas Papademos and Executive Board member Juergen Stark also said yesterday that economic fundamentals in Europe remain sound.

European manufacturing unexpectedly maintained its pace of expansion in January. A gauge of manufacturing held at 52.6, beating economists' forecasts for a decline to 52.1, a report from Royal Bank of Scotland Plc showed today.

“Our mandate consists of ensuring price stability for European citizens in the medium term,'' Trichet said. The ECB has to be “credible in guaranteeing price stability.'' Policy makers next meet to decide on interest rates on Feb. 7 in Frankfurt.

Before the Fed's rate cut, the Bank of England was cautious about reducing its interest rates further. Policy makers on Jan. 10 voted 8-1 to keep the benchmark rate unchanged at 5.5 percent, minutes of the meeting published today showed.

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A buyout of hobbled mortgage lender Countrywide Financial likely would be approved by regulators, analysts say, because otherwise the company could file for bankruptcy, injecting further uncertainty into the home-loan market.

Bank of America Corp. is in talks to acquire Countrywide, The Wall Street Journal and The New York Times reported Thursday online, citing unidentified people familiar with the deal. The transaction would put the country’s largest mortgage lender, which has experienced a surge in home-loan defaults and has seen its share price plummet, in the hands of the largest U.S. bank by market capitalization.

A Bank of America-led buyout is “the one and only hope that (Countrywide) has” to avoid bankruptcy, according to Sean Egan, managing director of independent ratings firm Egan-Jones Ratings Co. Egan-Jones warned earlier this week that Countrywide could “falter” unless it receives an infusion of $4 billion in capital within the next two weeks.

“I cannot imagine that the regulators want Countrywide to go under,” said Bert Ely, a banking industry consultant in Alexandria, Va. “I think they’re actually quite nervous about that.”

A combination of Bank of America and Countrywide would require approval from the Federal Reserve, and possibly other agencies. Banking regulators declined to comment on the reports.

Federal law bars banks from making acquisitions that would increase a bank’s market share to 10 percent of U.S. deposits, and Bank of America is nearing that point at 9.88 percent. However, experts disagreed about whether deposits held by Countrywide’s federally regulated thrift, Countrywide Bank, would count toward that limit.

In addition, banking industry experts say Bank of America could easily lower the total amount of money held in deposits by lowering interest rates and losing deposits to competitors.

Federal bank regulators “are not looking to clean up messes like the largest mortgage originator in the country going under,” said Bart Nater, a San Francisco-based senior analyst with consulting firm Celent.

Regulators are likely to be far more concerned with whether Countrywide fails — and the economic ramifications of such a large collapse — than with consolidation in the mortgage industry, Nater said.

For the first nine months of 2007, Countrywide was the largest U.S. mortgage lender, while Bank of America ranked fifth, according to trade publication Inside Mortgage Finance pay day advance. Its publisher, Guy Cecala called the potential deal “by far the most palatable way to resolve Countrywide’s problems.”

A failure at Countrywide, Cecala said, would have severe ripple effects, including forcing the industry and regulators to figure out who would take on the responsibility of collecting payments for millions of U.S. home loans.

It wasn’t clear how quickly a deal might be struck for Countrywide, which has been roiled this week by rumors that a bankruptcy filing was imminent. The Journal reported that negotiations between the two companies could fall apart.

Bank of America, which took on a 16 percent stake in Countrywide over the summer, told The Associated Press it does not comment on market rumor or market speculation. Countrywide did not immediately return calls or e-mails seeking comment.

Countrywide shares climbed $2.63, or 51.4 percent, to close at $7.75 Thursday, while Bank of America shares rose 56 cents, or 1.5 percent, to $39.30.

The New York Stock Exchange said Thursday it asked Countrywide to issue a public statement indicating whether there are any corporate developments that can explain the “unusual” trading activity. The exchange said the Countrywide declined to comment.

Countrywide’s stock has plummeted in recent days to record lows amid intensifying anxiety among investors over a continuing surge in defaults and foreclosures afflicting the Calabasas, Calif., lender and others in the mortgage industry.

Last August, the mortgage lender drew on an $11.5 billion line of credit to steady itself.

Bank of America aided Countrywide by buying $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions.

If Bank of America should convert the shares, it would hold between 16 percent and 17 percent of Countrywide shares. Like other lenders, Countrywide has tightened its credit guidelines and stopped selling some types of adjustable rate loans.

Last month, when asked whether he saw any opportunities to make yet another deal to expand his financial services empire, Bank of America chief executive Ken Lewis casually answered, “Nothing that comes to mind.” When asked specifically about Countrywide, Lewis said he would have “to eat about seven years of my words” if he ever made a deal in the mortgage industry.

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