Automotive News - May 19, 2008 - (Page 32)

32 • MAY 19, 2008 TA L K F R O M T H E T O P Toyota’s Lentz: A crash course in hard times ven at high-flying Toyota Motor Sales U.S.A., the state of the economy means that growth no longer is guaranteed. Double-digit sales increases have been common this decade for Toyota, but in 2008 the Japanese automaker was down 3.3 percent through April. Jim Lentz, named Toyota’s U.S. president in November, finds himself in a tough position. On the plus side, Toyota Motor has edged past Ford Motor Co. in sales this year, making it No. 2 in the United States. And Toyota is still gaining market share. Lentz spoke with Staff Reporter Mark Rechtin. What is the Toyota/Scion inventory situation? The Automotive News Data Center reports inventories now at nearly 400,000 units out the factory door as of May 1, which would be the highest unit count in Toyota history. At the end of April, we counted 324,000 units, which is 45 days’ supply. On the passenger-car side, it is 35 days. On the light truck, it is 61 or 62. We’re probably where we want to be on car, a little heavy on truck. Given the recent volatility, our long-term pipeline is in good shape. We are making adjustments. We are slightly higher than where we want to be, but it is nowhere near a problem for us. But now you are getting dealers saying “No, thanks” to increased volumes they have earned from past performance. That has never happened before at Toyota. There are always times when you have certain (vehicles) that you have too many of. Today’s activity in Florida shows it is a pretty soft market. Dealers in L.A., Phoenix and Las Vegas are getting their days’ supply in line with the marketplace. Eight out of 12 Toyota regions had their best April ever. But those obviously weren’t California and Florida, your key areas. How long before your core markets recover? Twenty-five percent of our sales are Florida and California. It’s tough to say when those economies are going to turn around. The question becomes when is the housing market going to turn … and credit markets ease up. Then there’s the impact of the cost of fuel and where consumer confidence is. Every expert on the economy gives a different story. Toyota Motor Sales is down nearly 27,000 units nationally, and of that California is down 16,000, Florida is down 7,000, and the rest of the western U.S. is down 4,000 or 5,000, so it’s really isolated in those areas. The rest of the country is up. Last month, Detroit area Toyota dealers had their best month ever. They retailed more than 1,000 cars for the first time. Seven out of 10 dealers sold in excess of 100 vehicles. What is the best way to get inventory costs in line? Cut production? Increase incentives? We want to have sales pull supply, with minor use of incentives when necessary. Our first adjustment is always on the manufacturing side. Sometimes it takes time to make Jim Are there signs that Toyota Motor Corp. President Katsuaki Watanabe’s “Customer First” quality program is working? We’ve had substantially fewer consumer calls to our 800 number on product quality on the (redesigned) Highlander and Sequoia. Warranty data and plant data suggest we have better quality. Lentz JOE WILSSENS those arrangements. Huge incentives create a huge artificial step for the next product (redesign), which makes a big challenge at launch. Where do you see production at the Princeton, Ind., plant headed? All three vehicles Princeton makes — the Tundra, Sequoia and Sienna — are way down. First, I tell the workers not to worry, you’re safe. When we make adjustments in Indiana, our team members’ jobs are not in jeopardy. They will be put in kaizen teams or in safety, efficiency or quality jobs. In the long term, that’s actually a good thing, because it’s a cyclical business, and they will be more highly skilled and trained. This happens to be a challenging period. All that said, our April fullsized pickup sales in Portland, Chicago, Kansas City, Gulf States, Boston and New York were all above April 2007. The truck continues to do really well. The challenge continues to be California, Florida, Denver, Phoenix and Las Vegas. Dealers are pinching pennies because of the economy, and that applies to facility renovation. Will Toyota provide financial assistance? Financially, we’re not going to assist because we think dealers can make it worth their while. Look at 2007. The average dealers who upgraded their stores had an increase in new vehicle sales six times greater than that of a regular dealer. Used-vehicle sales were up twice that of the average dealer. Service business was double that of a regular dealer. Parts was 1.5 times that of an average dealer. Profits were up. Despite today’s economic times, it’s still in the best interest of the dealer and customer to do it. By the end of 2010, 70 percent of our dealers will have done Image USA II. Has the higher price of the secondgeneration Scion models changed consumer acceptance and closing ratios for the brand? I don’t know about traffic and closing ratios. But the age of buyers is a little older, by a couple years, and the price point has something to do with that. With higher gas prices, we’re broadening our appeal beyond the normal base. The awareness for the new xB is starting to hit stride. Is Scion losing the hipster demographic? Are dealers just as willing to put a Corolla or Yaris customer into a Scion? When you go to Scion events and see people 18 to 68 years old, they all think the other folks are cool. The younger ones engage the older ones about what they did to customize their cars. It’s a fairly tight community. They socialize and do things together. A Florida club did a fundraiser because one owner had a child with a rare disease. It’s not a Harley club, but it has that feel of community. The xD has had a pretty slow launch. We’re pretty close to xA levels now. Higher gas prices will help the xD hit its stride quicker. I think the 3,000 units we sold in April was a pretty good month for the xA. You now have almost 1,000 Scion dealers. Does that hurt exclusivity of the brand? From the customer perspective, I don’t think it does. In a given metro, whether all dealers have it or seven out of 10 doesn’t affect consumers. What can Toyota do if a dealer decides that the Yaris and Corolla are better values than Scion and provide better sales commissions and therefore stops putting resources behind Scion? Nothing, really. We haven’t seen that happen thus far. We do have a Scion “covenant” to do certain things. That’s looked at a few times a year for compliance, but short of that, there’s not much we can do. What does your market research show you about Scion compared to when it was launched? The awareness level continues to build. Four million young people are turning 16 every year, so we’re on the radar of young people. We’re now seeing Scion in terms of used cars as people cycle through for the first time. About 80 percent of Scion trades are for Toyotas or Lexuses or other Scions, so the majority of those trades end up on a Toyota lot. How long do people need to wait for the Lexus LF-A sports car to hit the market? Have economic conditions put the car on hold? It’s still a project that’s alive and well. Given the nature of that type of vehicle, I can’t see how economic conditions will affect that type of vehicle. It will be a global product, assuming we bring it out. For most of the ’90s and early 2000s, Lexus sold more SUVs than cars. Given where the market is headed, is that hurting Lexus? On the Toyota side, passenger cars are hot and there is more truck supply, but Lexus is the opposite. Lexus’ year-to-date car is down 16 percent, but truck is down only 1 percent. The RX continues to do quite well against a tough segment. And the LX isn’t a monster, but it’s doing well. Lexus car sales are down sharply. How do you account for that? I don’t. It’s hard to understand. The overall luxury market back to December was red-hot and cooled relatively quickly in January, February and March. There are some challenges on the residual side for some manufacturers with leases coming in below price. Our residuals are holding their own. It’s hard to say how long that will last. c

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Automotive News - May 19, 2008 Ford eyes smaller F-150 cousin Sonic: Mercedes tries to 'extort' store upgrades Chrysler seeks 25% slash in parts prices Dealership managers pushed Chrysler's latest incentive Crain names 4 new VPs Automotive News staffers win Wheel Awards GM will keep cutting sales to fleets GM studies the future of full-sized trucks American Axle plans to expand in Asia At Lexus, the sales laggards are cars VW positions Tiguan as 'GTI' of small SUVs Tata enters race for 100-mpg car Harley Earl was the daddy of auto design Focus will follow Fiesta as a global vehicle Lexus shows how it sweats details Industry slows tide of state CO2 rules Chevy tweaks Cobalt to add fuel economy Be careful; don't do anything dumb Looking ahead to different industry They thought they knew everything Cerberus doesn't belong in autos Dealers as scapegoats Smart, steady growth works best for suppliers Farley's smart to value Ford's heritage Absurd logic in the U.S., cowardice in Germany BMW, Daimler keep a wary eye on U.S. economy James Franey Dealers' approach can lessen pain of staff cuts GM plans to distinguish Opel with image makeover Make or buy? Software can estimate costs for company Honda, Toyota see robots in their futures Bosch aims to lead in hybrids technology King of hearts Clarke aims to get GM back on track in N.A. Fields navigates Ford through 'white water' LaSorda steers Chrysler's global ventures Toyota's Lentz: A crash course in hard times Truck sales fall 13% in April Modine sells Thermacore unit Alcoa to close Mexico plant Toyoda Gosei expands in Mexico Hayes Lemmerz plans to close Georgia factory Japan's sales slide 2% in 1st quarter; output climbs Dealers Hyundai let U.S. direct Sonata freshening After .com and .edu, is it time for .car? Panoramic sunroof of Lincoln MKS boosts Inalfa sales Chrysler hedged gas price bet Smart phones help dealerships retain customers CAW completes pacts with GM, Chrysler early GM, UAW resolve 2 disputes New media buyer for Chrysler Visteon names Stebbins CEO Convertible registrations drop Ferrari: From denial to debut Buildings Porsches in U.S.? Depends whom you ask Toyota will go slow in Tupelo Ghosn is glum on prices, U.S. sales prospects Pischetsrieder has earned a celebratory cigar NHTSA spins VINs, averts meltdown F_RD GU_S WI_ BUI-_KS 50 PEOPLE FOR 50 YEARS Yutaka Katayama Clarence Talley Jim Morton Pete Brock Marvin Runyon Yoshikazu Hanawa Bill Bruce Shin Maki Jack Collins Mitsuya "Scape" Goto Bob Link Soichi Kawazoe Jerry Hirshberg Takashi Ishihara Roy Rogers John Parker Bob Thomas Teruo Uchino Morrie Sage Bob Thomas Nobe Wakatsuki Earl Hesterberg Carlos Ghosn Lee Clow Jerry Benefield Yutaka Kume Doug Betts Tim McCarthy Jed Connelly Atsushi Nakatsuji Dave Hubbard Joe Opre Patrick Pelata Yoshiyuki Kimura Diane Allen Mad Mike Taylor Chuck King Larry Dominique Mark Igo Mitsuhiko Yamashita Shiro Nakamura Tom Mignanelli Dick Roberts William Cushing Emil Hassan Chester Luby Jane Nakagawa Louis Schweitzer MR. K Ray Lemke Richard McCutcheon

Automotive News - May 19, 2008

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