Toyota is acting strange lately.
- During the 90’s, Toyota led the charge in hybrid technology despite the fact they made little or no profit on every hybrid they sold.
- Last week, Toyota announced that they will not significantly invest in all-electric vehicles, nor will they choose to use Lithium-ion battery packs in upcoming vehicles.
15 years ago, Toyota rolled the dice on hybrids with no regards to costs. Today, Toyota rejects the latest battery technology to save money, and they don’t seem particularly concerned about leading the way on all-electric cars (despite their promise). Puzzled? Keep going.
Toyota's recent moves smack of confusion and poor management.
In March of this year, Toyota reported the largest financial loss in the history of the company and immediately jumped into cost-cutting mode. They canceled executive bonuses, scaled back investments, and decided to close NUMMI, their largest auto plant in California, in order to cut costs.
All of these changes were supposed to usher in a new way of doing things – a “back to basics” approach. Old Toyota CEO Katsuaki Watanabe was fired in June to make way for new Toyota CEO Akio Toyoda, grandson of the founder of Toyota. Akio promised an emphasis on profits, building small cars, and he rejected the goal of becoming the largest car company in the world.
Yet we wondered aloud why Toyota seemed to be throwing away momentum by focusing on small cars. After all, Toyota’s financial problems weren’t because of a decision to “step away” from small cars (as some at Toyota seemed to believe) – the issues were a credit collapse and Toyota’s dependence on production in Japan. Toyota’s profit margins were dependent upon a strong dollar, a myopic business practice to say the least. Toyota leadership often seemed to be contradicting previous moves for the sake of contradiction itself.
Last week, Toyota made yet another puzzling move: At a dealer meeting, Toyota announced plans to spend $1 billion on marketing during the 4th quarter, which is 30-40% higher than normal. While Toyota’s dealers were certainly excited, this move seems wrong-headed for two reasons:
- Toyota dealer inventories are low. Cash for Clunkers drove demand wild in August, and many Toyota dealers are running low on inventory (many are completely out of Corolla and Yaris, and Camry and Highlander inventory is as low as it’s ever been). It will take 30-60 days for dealer inventories to return to “normal” levels…which means that some Toyota dealers will begin the 4th quarter marketing blitz with low inventory.
- Cash for clunkers undoubtedly “pulled forward” some demand. While there are signs that the economy is recovering, there’s no denying that the hysteria surrounding Cash For Clunkers pulled some sales forward (people that were planning on buying September or October likely bought in August). The most realistic expectation for the auto industry is that the rest of 2009 is going to be a lot like the first 7.5 months – slow.
If all of the above isn’t enough to convince you Toyota management is lost, consider this:
Toyota is going to “push” lease residuals to boost sales – why didn’t they do this earlier? At the aforementioned dealer meeting, Toyota said they’re going to use marketing funds to increase lease cash and inflate residuals. These moves will allow Toyota dealers to advertise ridiculously low payments (think $199/month 2010 Camry). The best part? The cost of this program won’t be realized for 2 or 3 years…which is when the auto market is expected to be hot again.
Where was Toyota on this move 6 months ago?
What better way to push sales during a downturn than to provide cheap new cars? Toyota could have enjoyed strong sales for most of the year (rather than just the last month) by advertising cheap payments. Instead of kick-starting sales, the Cash for Clunkers program could have been a strong end to a great summer.
Too bad all the executives were busy cutting costs 6 months ago instead of thinking about how to boost sales.
Of course, it’s possible that this move was planned all along. Perhaps Toyota knew that Cash for Clunkers would be a wild success (in terms of sales volumes). Perhaps they knew that Obama and Congress would triple funding for C.A.R.S. Perhaps they knew that, despite the wild sales volumes in August, the car market would continue to grow into the 4th quarter.
Or perhaps Toyota is being managed in a helter-skelter “let’s-do-this-no-wait-let’s-do-that” sort of manner…which is completely uncharacteristic of them. And puzzling.
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Why spend 1 billion in mktg. in the 4th qtr. like you said when there are very few small fuel efficient 4 cylinder Toyota cars on dealers lots? I agree, stupid if you ask me. They cannot promote what they do not have in stock or on the way or even get from another dealer with hardly any cars left. I would spend that billion and get the production of Tundra’s up so consumers have a choice to pick from once they get to a dealer and find out that by the salesman saying, ‘oh, we have this color in this one option and that is it for another month or two until we get more in.’ Also, I have my 09′ Corolla only 5 months old now with only 6K on it and already in the shop for a TSB for rear window clips creaking of which they do and is loud and annoying along with a brake recall issued by Toyota to re-route the brake vacuum booster lines so in winter months the brake lines do not get moisture in them and fail/freeze. Toyota is ONLY issuing the recall on these Corolla’s for the northern states like WI, MN, etc. and NOT for cars driven down south in warmer climates. Toyota is issuing up a can of lawsuits by NOT issuing a mandatory recall for this brake issue in cold weather since what happens if this car is driven up north or bought up north in colder climates and the brakes fail? Also, my driver’s seat is creaking loudly and the driver’s headrest inserts into the driver’s seat rocks back and forth enough to rattle all the time right behind my ears while driving. I think toyota better take that 1 billion dollars and start improving the quality control and interior/exterior components of the vehicles they got on the road NOW before they start to lose market share by building non-quality vehicles and making them cheaper and more prone to failure or they will be in the same boat as GM and Chrysler were in. If Toyota loses my faith in vehicles like they are starting to since I already lost faith in GM, then who will I turn to for a decent quality vehicle?