It’s tempting to compareMotor Corp.’s North American operations to the infamous Energizer bunny: No matter what challenge it faces, it just keeps going and going and going.
While the auto maker endured an embarrassing sexual harassment scandal at itsMotor North America (TMNA) office and saw its vehicle recalls increase in the U.S., such events did nothing to slow sales growth in 2006.
Toyota, Lexus and Scion brand sales stood at 2.11 million units through October, according to Ward’s data, a 12.2% increase compared with like-2005.
Through October, Toyota’s U.S. market share was 15.3%, up from prior-year’s 13.2%, outpacingGroup, which held 12.9% share in the period.
The industry looks to next year, when the Japanese giant might overtakeMotor Co. in the U.S. and, possibly, skip past Corp. to become No.1 worldwide.
While it may seem the auto maker is growing by leaps and bounds, Jim Press, president-TMNA, says the key to Toyota’s success has been steady growth, which he sees continuing into 2007, despite a predicted flat industry overall.
This year, Press expects Toyota to end 2006 10% ahead of 2005’s 2.26 million units.
“We were able to take advantage of the introduction of new products early on, and there was a good tailwind from the gas-price situation in terms of some of our more fuel-efficient vehicles,” Press tells Ward’s.
Sales of Toyota’s long-in-the-tooth Corolla have risen 13.2% this year (domestic and import sales combined, including the Matrix), while the new Yaris subcompact has added 58,146 units, surpassing the 50,000-unit annual goal Toyota set for 2006.
And, while many of the auto maker’s utility-vehicle sales slid this year as a result of high gas prices, the RAV4 cross/utility vehicle, new for the ’06 model year, more than doubled sales through October.
Press was named TMNA president this spring, shortly after a female employee in the unit’s Manhattan office filed a sexual harassment suit against his predecessor, Hideaki Otaka.
Press moved to New York for the position from Los Angeles, where he had been president and chief operating officer of Toyota Motor Sales U.S.A. Inc. He is the first American to hold the post and is the second highest-ranking North American Toyota executive (Yukitoshi Funo is CEO of TMNA).
“The sexual harassment case was a very serious issue that happened in one location with one individual,” Press says, adding many companies confront such problems. “(It was) not the kind of catastrophic event that might affect sales.”
More important, Press says, is how the auto maker responds to such issues. “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,” he says. “I think we were able to come out a much stronger company.”
On the topic of recalls, which in 2005 surpassed Toyota’s U.S. sales, Press says most have been voluntary, and many were procedural.
“They don’t reflect defects,” he insists, saying Toyota tries to anticipate problems and correct them before customers have a problem. “Some other companies wait until they have a problem and then deal with the unhappy customer,” Press says.
The highest-volume U.S. recall (367,000 units) made by Toyota this year was due to faulty carpet clips in its Toyota Highlander and Lexus RX 330 and 400h CUVs. The clips could come loose and become lodged behind the accelerator or brake pedals.
“The basic truth is our customers are happy. They’re loyal; they’re satisfied,” Press says. “We’ve really done a lot more, redoubling our efforts to improve our quality.”
Next year will be the biggest test yet of Toyota’s reputation for quality as it launches its redesigned Tundra fullsize pickup in February. One of the Tundra’s production sites is an all-new plant in the non-automotive town of San Antonio.
Matching Big Three competitors in size and power for the first time, the ’07 Tundra is Toyota’s most serious attempt yet at stealing sales from Detroit’s cash cows.
However, Press sees it differently.
“Not only is there 2.2 million big pickups sold every year (in the U.S.), there’s plenty of room for everyone’s business,” he says.
Press predicts the new Chevrolet Silverado and GMC Sierra will stimulate the fullsize pickup segment, which has seen sales fall 10.5% this year to 1.875 million units, Ward’s data shows.
“We don’t really have a concern (about not meeting Tundra’s 200,000-unit annual target),” he says. “In fact, our concern is we may need to have more capacity, not less.”
Toyota continues to study a hybrid-electric pickup, as well as a diesel-engine option, for the Tundra, he says.
However, Press sees flex-fuel capability, which enables a vehicle to run on a mix of gasoline and ethanol, and cylinder-deactivation technology as less appealing solutions in solving the poor fuel efficiency inherent with large trucks and SUVs.
“Right now, there’s not a lot of demand for flex-fuel. I think there’s only 800 gas stations that sell the compatible fuel,” he says, noting variable valve timing and an available 6-speed automatic transmission will help the Tundra achieve better mileage without the added expense of cylinder deactivation.
Also new from Toyota next year is the hybrid-electric version of Lexus’ new flagship LS, the LS 600h.
While Press is mum on other upcoming products, Ward’s data shows a new fullsize Sequoia SUV, built on the new Tundra platform, due as an ’08 model, as well as a larger Highlander CUV, to be built in the U.S. instead of Japan. A new Land Cruiser SUV also is slated for next year.
Toyota’s Scion youth brand earlier announced it will replace two of its models, the xA subcompact car and xB CUV, in spring.
Press says Toyota will continue to manufacture Scions in Japan due to the economies of scale by building the small cars on large-volume global platforms.
But the auto maker also is studying adding another North American vehicle assembly plant, he says, in addition to the new facility under construction in Woodstock, Ont., Canada. It is slated to open in 2008, to make RAV4s.
Meanwhile, Toyota will add 100,000 Camrys next spring on a dedicated line at Subaru of Indiana Automotive in Lafayette, IN, a result of Toyota taking an 8.7% stake inHeavy Industries Ltd. late last year.
“We really put an acceleration on the ramp-up of the Indiana plant,” Press says. “Hopefully, that will be able to take care of (Camry capacity), but if it doesn’t, we’ll have to continue to evaluate our plans.”
Press declines to comment on reports Toyota will pull the plug on its Camry Solara coupe in favor of adding a new CUV at its Georgetown, KY, plant.
But he does see CUVs continuing their rise in the U.S. and promises Toyota will have more.
“As we identify opportunities in the market, we will provide additional crossover vehicles,” he says.
Ward’s data shows a new midsize Toyota CUV, the FT-SX, will be built on the Camry platform, arriving as an ’09 model, to be assembled in the U.S.