Special Report

logo2006 Year in Review

While Toyota Motor Corp. endured an embarrassing sexual harassment scandal at its Toyota Motor North America Inc. (TMNA) office and saw its global vehicle recalls increase again to previously unseen levels – leading to a public apology by Toyota President Katsuaki Watanabe in Japan – Toyota’s sales growth, and near-global dominance, continued in 2006.

North America, specifically the U.S. market, continued to be Toyota’s biggest, and the auto maker ended the year with another record tally.

Toyota, Lexus and Scion brands combined sold 2.54 million units in the U.S., with Lexus the No.1 luxury brand for the sventh consecutive year.

Toyota ended the year with a 15.4% market share in the U.S., above Chrysler Group’s 13% and knocking on the door of Ford Motor Co.’s 17.3%.

In the U.S., Toyota routinely exceeded DC’s monthly sales, and twice managed to overtake Ford’s monthly tallies, in July and November.

The auto maker kicked off 2006 by introducing its new Camry midsize sedan at the North American International Auto Show in Detroit.

The sixth generation of the Camry sold 448,445 units in the U.S. in 2006 (362,961 North American built and 85,484 imports), making it the country’s best-selling passenger car for 10 years running. A new, hybrid-electric variant accounted for 31,341 units.

Toyota also unveiled the new Lexus flagship sedan, the LS 460, at the Detroit show. The car drew much media attention for its “world’s first” 8-speed automatic transmission and automatic parallel parking feature.

It went on sale in October 2006.

In February, there was another big unveil for Toyota, as it took the wraps off its most important vehicle yet for the U.S. market, the new ’07 Tundra fullsize pickup truck, at the Chicago auto show.

The Tundra now matched the size of the U.S. Big Three’s fullsize pickups and came in more variations than ever. It was offered in three cab styles, two bed lengths, three trim levels, and with a choice of three engines, including an all-new 5.7L V-8 making 381 hp and 401 lb.-ft. (544 Nm) of torque, exceeding all other fullsize pickups’ largest V-8s, save for a 400-hp, 6.2L engine installed in high-end GMC Sierra and Denali.

While many had expected the Tundra to debut late in the year, soon after the Nov. 18 opening of Toyota’s new San Antonio truck plant, the auto maker twice delayed the on-sale date of the truck, first to January 2007, and then February.

Toyota later admitted it wanted to be able to offer the 5.7L V-8 at launch, something it wouldn’t have been able to do with an earlier rollout.

In April, Toyota debuted the hybrid version of the Lexus LS, the LS 600h, at the New York auto show, where it also took the wraps off a funky Scion concept coupe, the Fuse, which hinted at the future direction of the popular Scion tC.

The following month Toyota experienced a rare black eye as a female employee in the New York City office of TMNA, Toyota’s North American holding unit, filed a sexual harassment suit against President Hideaki Otaka.

The auto maker quickly shuffled Jim Press, president of Toyota Motor Sales U.S.A. Inc. in Los Angeles, into the position after Otaka resigned amid the turmoil.

Yukitoshi Funo, CEO of TMSUSA, was named CEO of TNMA, but Press became the first American to hold the No. 2 title as president.

“The sexual harassment case was a very serious issue that happened in one location with one individual; (it was) not the kind of catastrophic event that might affect sales,” Press told Ward’s in October.

Toyota, he said, used the experience as a learning tool, and revised the way it handled such complaints.

“We really took advantage of the situation to review our processes and re-examine everything we could to make sure these things don’t happen again and, if they do, to make sure there’s a good due process for adjudication,” Press said.

The remainder of 2006 was much quieter for Toyota’s U.S. operations, except for the November opening of the San Antonio plant, where Watanabe made a rare public appearance.

Over the summer in Japan he made headlines after bowing deeply at a press conference, following the news that three Toyota managers hid evidence of steering defects with the Hilux Surf (4Runner) SUVs for eight years, from 1996 to 2004, when a recall finally was issued.

“I take this seriously and I see it is as a crisis,” he said of Toyota’s increasing recalls.

The incident called to light memories of a similar scandal at Mitsubishi Motors Corp., which devastated the auto maker’s sales both in Japan and abroad.

Toyota’s total number of recalled vehicles fell to 2.8 million in 2006, but the tally was still high for an auto makers as it prided itself on reliability.

It was an alarming occurrence for a company that prided itself on its reputation for quality, but Press said, in the U.S. anyway, the recalls were procedural and did not involve defects.

Also in Japan, Watanabe, acknowledging Toyota’s weakness in diesel engines, announced the auto maker was taking a 5.9% stake in Isuzu Motors Ltd. Isuzu and Toyota would co-develop small diesels, as well as work on improving existing diesels.

“We consider hybrid technology as one effective solution, but in light of the varying regulations and energy policies in different countries, as well as the proliferation of fuel sources, we need stepped-up efforts in the diesel field,” Watanabe said in November.

Meanwhile, Japan was the first market to receive Toyota’s new Auris (”a-oris”) 3- and 5-door hatchback, previously known as the Corolla hatchback, with sales beginning in October, along with the new Corolla sedan and wagon.

However, Europe, where Auris sales were slated to commence in first-quarter 2007, reportedly is going to be the primary market for the car, accounting for 150,000 of the 200,000 – targeted worldwide sales for 2007. Auris sales in Europe alone were forecast at 200,000 in 2008.

As in Japan, the Corolla name would continue in Europe for the non-hatchback body styles, an executive told Ward’s at the Paris auto show, where an Auris concept was shown.

Toyota pushed back the North American debut of the new Corolla a year, until spring 2008, blaming the delay on stretched research and development resources.

In Europe, Toyota’s Lexus brand reportedly exceeded its 45,000-unit sales goal for 2006 early in the year and expected to top the forecast by at least 6%-7% for entire-2006.

Toyota increased its push into Europe, mainly by expanding its clean-diesel lineup. Thirteen had been introduced through 2006 and diesels powered 41% of all Toyota models sold in Europe.

China was the one market where Toyota had been embarrassingly behind the curve, but the auto maker hoped to make up for lost time, announcing plans to triple sales to 600,000 units by 2008.

Watanabe wanted to increase Toyota’s market share in China to 5% by 2010 from 3.3% in 2005.

The auto maker planned to do this by pushing its core Corolla and Camry models, and through expansion of the current sales and service network from 352 dealers in Toyota’s three Chinese distribution channels.

For the January-September period, Toyota’s Tianjin FAW Toyota Motor Co. Ltd. Chinese joint venture saw its sales increase 79.3% compared with the first nine’ months of 2005, to 169,300 units. That was good enough for seventh place, but still more than 100,000 units behind market-leader Shanghai General Motors Automotive Co. Ltd.

In Australia, Toyota launched its new Aurion large sedan (Avalon in the U.S.), saying, “the game has changed” in its ad campaign for the car, which launched in late October.

Toyota wanted a piece of the lucrative large-car segment in Australia, which had been dominated by GM Holden Ltd.’s Commodore and Ford of Australia Ltd.’s Falcon, for four decades.

Toyota Australia launched output of the new Camry at its Altona plant in Melbourne in July.

The previous month Toyota took rare action: closing a plant. The shuttering of the Port Melbourne facility closed the book on 54 years of auto production at the plant, where the first Toyota was built outside Japan in April 1963.

In India, Toyota’s Innova multipurpose vehicle reached 50,000 sales in August. The vehicle went on sale in March 2005.

After strikes at Innova’s production site in Bangalore in the first half of the year, where unionized workers protested working conditions and employee suspensions, officials of Toyota Kirloskar Motors Ltd., Toyota’s Indian joint venture, reached agreement with the union on a 10% wage increase.

Despite the unrest, Toyota was going ahead with plans for a new plant adjacent to the existing Bangalore facility. Reportedly, it planned to begin production of a small car, with subsidiary Daihatsu Motors Ltd., by mid-2007.

In the Association of Southeast Asian Nations region, Toyota in July set up a production support company in Thailand, Toyota Motor Asia Pacific Co. Ltd., to take over for TMC. in providing production, purchasing and logistics support for the auto maker’s operations in the region.

In December, Toyota began shipping Fortuner SUVs, as well as the Avanza small car, from its PT Toyota Motor Mfg. Indonesia plant to the Middle East. Toyota previously built Fortuners for the Middle East in Thailand.

– with Mack Chrysler, Alan Harman, Sudhakar Shah and Roger Schreffler