Mississippi taxpayers provided almost $300 million in incentives to the Japanese company.

Toyota is resuming construction of its Blue Springs, Mississippi plant that was put on hold in late in 2008 as the reckless practices of Wall Street caused the collapse of the global economy.

Instead of building Prius hybrid models as previously announced, though, the $1.3 billion facility will make Corolla compact models instead. Initially the plant was going to produce the Toyota Highlander sport utility vehicle when the project got underway in 2007.

The decision is the latest setback for the beleaguered United Auto Workers union since Corollas were previously built in a unionized plant – NUMMI – in Fremont, California that Toyota shut in March. Corollas for North America have been built in Japan since April.

The decision to close NUMMI was controversial, to put it mildly,  since California is Toyota’s largest market by far, and the home of Toyota’s U.S. headquarters.

Toyota said in a statement that it would hire 2,000 “team members” and build the Corolla sedan beginning in the fall of 2011. Through May of this year, Toyota has sold more than 118,000 Corollas in the U.S.  

“Toyota appreciates the patience of Gov. Barbour and all Mississippians, but we first needed to fully utilize our existing facilities as the economy slowed. Now it’s time to fulfill Toyota’s promise in Mississippi,” said Yoshimi Inaba, president and chief operating officer of Toyota Motor North America. “Toyota remains committed to making vehicles where we sell them and to maintaining a substantial manufacturing presence in North America.”

The Toyota Motor Manufacturing, Mississippi (TMMMS) building is almost complete. The remaining work involves the installation of equipment. About 60 team members already occupy the administration office.

Toyota will continue to import its popular Prius hybrid models from Japan. Through May of this year, Japanese workers built more than 55,000 Prius models for U.S. sales, a 30% increase compared to the same period in 2009.