Toyota.gif” vspace=10 width=120>By Bert Wyatt

If constant public exposure were an ingredient of success, then America’s Big Three automobile manufacturers would have nothing to worry about. Conflict makes news, and barely a day goes by without some mention of Firestone tyres, Oldsmobile, or the flawed Mercedes/Chrysler takeover. Unfortunately, none of this has translated into bottom line profit for those involved.

In recent years, all three have embarked on mergers. Chrysler must wish it had never heard the word Mercedes. Ford preens itself on the successful acquisition of Jaguar, Volvo and Land Rover, but simultaneously finds itself vilified for its part in the Firestone tyre disaster.

General Motors? It safely gobbled up the Saab and Hummer minnows, but confounded everyone by side-lining its century-old Oldsmobile brand whilst continuing to bankroll a major expansion of Saturn, a brand still to prove itself. Not to mention its urge to dive in to the Daewoo imbroglio, ignoring a blunt warning from Daewoo’s union boss: “Take over this company, but you’ll regret it”. And all the time presiding over a dispiriting loss of market share.

But then along comes Toyota, leaving the spotlight to others, eschewing takeovers as a quick route to prosperity (stashing a war chest of $15 billion as a result). When Toyota knocks on your door, it is as a partner, not predator. Current collaboration talks with Ford and Europe’s PSA are confined to specific fields such as small cars and diesel engines, mirroring the existing partnerships with GM and Volkswagen.

America’s Big Three auto manufacturers have been in the spotlight for the wrong reasons while Toyota has successfully gone-it-alone

Basking in the success of its go-it-alone policy, it adds to its range piece by piece, constantly gaining in reputation and reliability. A shining example to the others, it now seems inexorably headed for 10% of the United States market. In its 40 years in North America it has now sold over 25 million vehicles.

Toyota succeeds by keeping its eye on the ball, chipping away at costs, and constantly improving productivity

As auto analyst Jim Hall puts it: “They’re unstoppable. As long as they don’t do something stupid, like buying a car company, they’ll be fine. Toyota’s plan is simple. Look at their US production plan over the years – start with measured numbers you can handle – improve, improve, improve. Expand, build on a new base, and improve, improve, improve.”

Including Lexus, world-wide sales in 2000 of over five million units, and sales in the United States of over 1.6 million (both increases of almost 10% over the previous year) are testimony to the success of a company that deftly avoids the pitfalls. Toyota succeeds by keeping its eye on the ball, chipping away at costs, and constantly improving productivity. Last year saw the introduction of nine new models, ranging from the Solara convertible to the Lexus LS430 replacement, the latter forecast to add several hundred thousand units to the franchise.

Needless to say, dealers in the Toyota and Lexus franchise are contented. Buzz Rodland, newly-elected Toyota National Dealer Council chairman, commented: “The serious problems are all gone – Toyota is firing on all eight cylinders. Our last meeting was scheduled for two hours, and we ran out of issues in one hour. We know that they listen to us and are quite prepared to make changes that we suggest.” He even sees the silver lining in the present downturn in car sales generally. “Toyota usually does well in down times. That’s why we have just completed a new development here.”

The need to handle two million units annually within the next five years has brought focus on to the dealer force. Success has its problems. Whilst Toyota consistently outpaces the competition in product quality, it trails the industry in customer satisfaction, doubly tantalising because of Lexus’s unchallenged supremacy in the CSI index. With a targeted 30% increase in volume over the next few years, the problem needs to be taken seriously.

Says Jim Melton, Toyota’s retail development manager: “Many dealers don’t have the efficiencies in place to handle the increased volume. They’re tired of the product being rated up and the CSI rated down. Focusing on short-term scores drives the wrong behaviour. This is not the programme of the month, it is a fundamental change in the way we do business.”

In responding with its ‘Signature’ programme, Toyota has identified 14 ‘dealer process standards’ that affect customer satisfaction, such as initial customer contact, dealership facilities, product presentation, E-commerce, and problem resolution. On the face of it, it sounds uncannily similar to Blue Oval, but it will be less confrontational. Says California dealer Jim Hawse: “It’s not a one-way street. Toyota is the master at coming up with programmes at the right time.”

Toyota’s premium brand Lexus finds itself market leader over such long-established brands as Mercedes and BMW

On matters of E-commerce, dealers have the comfort of knowing that Toyota is committed to the franchise system, as witness the unequivocal rebuttal of Auto-by-Tel’s overtures to Toyota Japan. Any venture into cyberspace will be in partnership with the dealer, eliminating that air of suspicion so evident in Ford and GM franchises. From its first venture, in partnership with General Motors (the NUMMI plant in California), Toyota has also been at the forefront of establishing manufacturing plants in North America, and now the great majority of its vehicles sold there are made there. In the past year, production of the highly-successful Lexus RX300 sport-utility has begun at Cambridge, Ontario, and America will produce the Toyota’s first V.8 engine.

Even by Toyota standards, the Lexus story is an exciting one

Even by Toyota standards, the Lexus story is an exciting one. The first Lexus car was sold in the States in 1989, sales reaching 16,000 in that first year. In year 2000, over 200,000 Lexus vehicles hit the road for the first time. In 11 years, Lexus finds itself market leader over such long-established brands as Mercedes, BMW, Jaguar, Lincoln and Cadillac, in the process easily out-selling all quality sport-utilities. At the recent NADA convention, all eyes were on the exciting new Lexus roadster, seen as the first genuine competition for Mercedes’ range of two-seaters.

From the outset, Lexus insisted on stand-alone premises for its new quality brand, and it is testimony to Toyota’s reputation that the first 50 Lexus dealers were happy to comply. Their faith was rewarded. Kenneth Meade, Michigan Lexus dealer, says: “Lexus was a question mark then, today it’s an exclamation mark.” Monthly sales per dealer – 109 with both Toyota and Lexus – have been consistently higher than any other brand but Saturn. Life will always be more pleasant with a comfortable bottom line.

For the first five months of 2001, in a total market 6.8% down on the previous year, Toyota has maintained its sales level and overtaken Dodge as the third best selling make in the nation. In the same period Lexus has increased its sales by a whopping 16.2%, selling an all-time record number of vehicles.

What is most remarkable, perhaps, is that this volume is handled by a mere 174 Lexus dealers, only a tenth of those handling either Cadillac or Lincoln. One hundred units a month against ten for those two domestics! Toyota and Lexus dealers can afford to smile. Sometimes, just sometimes, the tortoise wins.

By Bert Wyatt

To view related research reports, please follow the links

world’s car manufacturers: A financial and operating review

Corporate Profile

regional report: North America