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Toyota Won’t Abandon Japan

CEO Toyoda will maintain “illogical” Japanese production base.

by on Jul.15, 2011

It may be "illogical," but Toyota CEO Akio Toyoda won't give up on building cars like Prius in Japan.

As his nation struggles to rebuild after the devastating earthquake and tsunami of March 11, Toyota Motor Co. CEO Akio Toyoda says he won’t contribute to Japan‘s problems by shifting more automotive production offshore – even as it contributes billions of yen in losses to the world’s largest automaker.

There had been mounting fears in the troubled Asian nation – but hope among many investors – that the Toyota family heir would use the crisis to justify a shift away from the home market reliance that has made it difficult to resume production after the disaster.  Japan’s largest automaker, Toyota has traditionally positioned its hefty Japanese production base as a matter of civic responsibility, though in the weeks after March 11, Toyoda admitted it was becoming increasingly “illogical.”

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Toyota controls roughly half of the home market, but its production base there is far more than what’s needed simply to supply Japanese vehicle needs.  Competitors like Nissan have steadily fled offshore – Nissan CEO Carlos Ghosn closing four Japanese plants since taking over that company’s reins in 1999.  But while most of Toyota’s growth has been fueled by new plants in places like North America, Europe and China, the maker has been reluctant to walk away from its original production base.

“Toyota is a company that was born and raised in Japan and we can’t just abandon it because the environment is difficult,” said the grandson of the company founder, insisting the automaker would “grit our teeth and protect Japanese manufacturing.”


June Car Sales Likely to Show Slight Rebound

But Toyota, Honda still likely to be down sharply.

by on Jun.28, 2011

Toyota sales will likely be off sharply for June.

The U.S. auto industry should have a reason to celebrate over the upcoming Independence Day holiday; initial data suggest that increased industry discounting set off fireworks for consumers, sending them back to showrooms after May’s unexpected downturn.

But the trendline remains soft compared to the strong market of early 2011, and at least one study of consumer “intensity” suggests that the rebound may not last long, sales potentially slipping again in the months ahead.

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June’s apparent upturn suggests that consumers are opening their pocketbooks again now that fuel prices have retreated a bit from an early spring surge.  Meanwhile, manufacturers like Toyota have consciously bought momentum by ramping up their incentives.  Makers had consciously trimmed back their giveaways over the spring – in large part responding to product shortages created by the March 11 earthquake and tsunami that devastated Japan.


Independent Panel Recommends Fixes for Toyota Quality, Safety Problems

Led by former Transpo Sec. Slater, group calls for more global flexibility.

by on May.23, 2011

Former U.S. Transportation Secretary Rodney Slater delivers some harsh recommendations to Toyota.

An independent panel led by former U.S. Transportation Secretary Rodney Slater has issued some far-reaching recommendations aimed at helping Toyota avoid the sort of quality and safety problems that have been plaguing the maker – resulting in the recall of over 10 million vehicles, damage to the once-lofty Japanese brand’s image and a slew of potentially costly lawsuits.

Perhaps the most far-reaching conclusion is that Toyota needs to shift from a highly centralized global structure to one that gives more autonomy to regional operations, notably in North America.  The panel’s report, titled “A Road Forward,” also stresses that Toyota needs to be more willing to listen to concerns raised about its quality and safety by outside sources.

The panel was initially created during the so-called “unintended acceleration” crisis that was kicked off by a huge October 2009 recall.  A second recall, three months later resulted in the maker temporarily halting sales and production while it dealt with potentially sticky accelerator pedals.  But a variety of other quality and safety issues have since cropped up, resulting in the callback of millions of additional vehicles.  That led the panel to conduct a “much broader” review, according to a summary of its findings.

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“It has been said that a good company takes a problem and solves it, but a great company takes a problem and learns from it,” said former Sec. Slater.  “Toyota appears to be committed to applying what it has learned to make important changes to improve its quality and safety processes, but there is more to be done.  We hope this report helps Toyota in that endeavor.”


McBlog: Toyota and the Trials of Job

“All the dealing is over. Everything’s over.”

by on May.13, 2011

Held captive by disbelief we watched on TV that improbable tsunami, dark with disturbed sand, textured with the detritus of people’s lives ranging from children’s plastic sandals to grown-ups’ cars. How could this be? An uncontrollable King Kong nightmare flinging recognizable everyday things across a mundane landscape.

Our brains struggled to wrench some sense from the sight of seaside warehouses and absurdly colored plastic tubs, equally freed of normality, floating off together in a frothing soup in which cars bobbed like Halloween apples. Cars! And inexorably the invading wave rolled ever higher, up concrete stairs step by step where observers certain of their safe perch, were suddenly faced by a frothing mastiff broken free of its chain.

Disbelief. Theirs and ours. How often did we go back to our computers to view it again, stilled stunned.

But did we have any idea how it would disturb the way cars are bought and sold in our own neighborhoods?

The tsunami has slunk back to sea but it has not ended. It is now sweeping a ghostly wave, delayed but no less dismaying, across the lives of those who buy and sell cars in the rest of the world. Dealers in Japanese cars particularly are like those people on the cement stairway, incredulous at the inching reach of the murderous wave and the destructive quake that set it in motion.

It’s simple. People who make their living selling cars cannot make a living without cars to sell. And one by one Japanese car makers have announced delays and reduced production in one after another models. More recently they are telling dealers to expect some 10-20% of the cars they usually wheel off the transporters.

My friend (call him Fred Vang because that’s his name) buys cars for clients who prefer to avoid the discomforts of the dealing ritual or the esoterica of contracts. He told me of a distraught phone call from a simpatico commercial manager at a Toyota dealership (you can call him Al because that’s not his name). Al had provided Fred’s clients the past year with 25 to 30 satisfying deals on cars that pleased them right down to the garage floor. That’s Fred’s purpose in life as he sees it – matching car to buyer in an all-around smile fest. Al has aided that quest for 15 years.

But Al told Fred: “All the dealing is over. Everything’s over.” The sheet listing cars eligible for incentive support was chock full one day, the next day all but blank. Two cars. “Where we used to get 300 cars we will now get 30,” Al told Fred. The two have had a great working relationship just as Fred has with others and a range of dealerships across the country. They have built trust and familiarity. No games to play. No time wasted. Fred could tell Al what a client was hoping for and Al with phone and computer would search the country. Success might depend on some swapping of cars among two or more other dealers – like kids with steelies and aggies at the corner lot. (Or do kids swap marbles anymore?)

A RAV4 V6 with all-wheel drive in a beachy sand color the client liked had just been delivered to a woman in Georgia. Big deal? Yes, because it was likely the only RAV4 in the whole country that color with the other stuff on it the way she wanted. Al had tracked it down, the deal was satisfying and the RAV4 now lives in Atlanta. The last deal of its kind before the tsunami arrived at the showroom door where Al plies his trade. “Tell her how lucky she is,” a dejected Al had said.

At first, shortly after the wave receded, the first far-reaching effect felt in the car world seemed almost amusing. The earth shook under the sea near a distant shore and the result was a car shopper in Kansas couldn’t get his Ford Explorer in the Tuxedo Black he wanted. A few shades of red and some blacks were simply no longer a choice. A small company in the devastated area, the lone source of a component that added a sparkle and depth to those particular paints had been put out of commission.

Globalspeak anyone? Butterfly wings in the forest indeed.

Similar breaks in tangled webs of interdependence followed. Parts that fit in the palm of a hand were made by suppliers. Even suppliers to suppliers. The small plants were in critical areas. And thus the parts they were responsible for were not in time for just-in-time. Damage at the source meant disruption at the line. A tooth in the cog went missing. The assembly process looked like a first grader’s smile.

Shutting down was the only choice until the roads were reconstructed, small factories were repaired and the gaps were filled. By mid-May Tuxedo Black was again available, but some observers said six months was a more likely time span to see production fully recovered from the quake/wave damage.

Al had said there could be no more distant Fred clients relying on emails, phone calls and FedEx. Now anyone looking to buy one of the rare cars must come in, close the door, sit in an office and be fixed with salesman smiles and finance officer frowns. And never mind option boxes – the extras were-pre-selected. Chromed wheels added with the cars barely off the transporter. All of those “rust and dust” specials as the vernacular has it. ADMs, the dealer-added extras, could boost the car’s drive-away cost by $2000 to $6000.

It’s survivor time.

With the dealer getting fewer cars each one must earn a greater share. A dealership that a few weeks before was making it on volume — waving product out the door ASAP with certainty more would be rolling in to keep black ink on the books – had to change operating procedure instantly. Now it would be the gross profit on each unit that mattered. Slow down. Make each one count: Not: “Would you like fries with that?” Instead: “Fries come with that.” If someone in the buyer’s seat says: “But I don’t want fries,” the sales manager opens the office door and calls out “Next”.

The drastic drop in product supply has not shown up equally in all markets. Fred said: “I think it started on the West Coast into the Rockies and has now jumped East. The Midwest may be slower to get it. But it will be world wide.”

Al called Fred again a few days after his first distressed call. An enlightened dealership owner had realized as bad as it was now the transporters would one day again roll freely and they could not find the bridges burned. Al told Fred: “He came in to tell me that you and I have worked together for a long time. We should continue that despite the shortage.”

But everyone else gets chrome wheels.

Fred felt compassion for Al’s plight, knocked off his feet by a wave that had long taken its odd flotsam back to sea. How many others like Al were there like him in Japanese dealerships? What a wrenching change of circumstances for them all.

He also felt a tinge of guilt. He could switch his custom to less affected brands. To American makers, to Japanese cars assembled in the US. Supply depended on models. A Subaru dealer he works with had told him that his supply for incentives had dropped from 250 to 21 cars. Japanese-built Imprezas and vehicles built on that platform – WRX and Forester – were already ranging from hard to find to impossible. Gone for sure are those models with manual transmissions. Easier to come by, for now at least, are the Subarus assembled in the US. Fred said the Legacy could now be had for less than an Impreza.

American cars were back on their financial feet again. And rising in the J.D. Powers approval ranks as well. The reports Fred prepares for his clients to help them in their selections were increasingly favorable to US cars. The American 3 should be able to plant a firmer foot in the market place with their competition crippled by circumstances.

And Korean cars most surely would benefit. Even pre-tsunami they had their dukes up ready to battle the Japanese industry. Now, composed of Korean-made parts, their supply was unaffected. The tsunami meant little to the manufacture of Kia and Hyundai. Not that American shoppers knew that. A report stated that visitors to Korean dealerships, as well as Japanese dealerships, had dropped off post-tsunami. Geography-illiterate Americans simply lumped Japan and Korea together. (And then there were those usual mind-numbing claims in the blogosphere that all cars coming from Asia would be radioactive anyhow. You’ll recall that the wave had killed a nuclear power plant in its sortie ashore. But whoo boy.)

Yes, Fred’s clients had good choices. “Detroit” cars, the Korean cars, the US-built cars of the Japanese companies. And then there was all of Europe, wasn’t there? In Fred’s own garage sat an appreciated VW Tiguan. The Tiguan was a good alternative to the RAV4, except the RAV4 had been beating it all hollow on the pricing front of late. Remember, Toyota’s first punch to the gut, long before the earth shook, was a redux of unintended acceleration. Ill-placed floor mats. Whatever. Some claimed ill-designed electronics. But an official investigation had cleared the electronics of fault. Toyota had been all but wrapping RAV4s in Christmas paper as its recovery from that first punch began. Excellent deals at least kept buyers in Toyotas through all its bad press. Gradually those deals tapered toward normality as recovery progressed.

Then came the second punch. That death wave. Harder on Toyota even than on Honda, Nissan, Subaru and Mazda because Toyota still produces more of its cars in its home country that it does abroad, many more than the other Japanese carmakers. (Nissan was reporting increased profits as May deepened.)

Maybe a two-liter “Trials of Job” would be a good next model for Toyota. (Preferably with a diesel.)

Though Fred had taken advantage of the RAV4’s positive marketing, sending lot of them across the country to a pleased clientele, he had prepared for a shrinking supply. The Tiguan is it will be. Except. Guess what he discovered about the safely-German Tiguan? Its transmission is made in Japan !

Is that a problem? It hasn’t seemed to be so far. But the world juddered a bit and shrank a tad more. And the tsunami dampened some more boot soles.

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Japanese Production Bouncing Back – But Automakers, Suppliers Ready to Abandon Quake-Prone Nation

“Frantic” efforts and “war rooms” helping suppliers get back to business.

by on May.12, 2011

The March 11 quake -- and the strong yen -- could lead Toyota and others to increasingly shift more of their production out of Japan.

It won’t be a good year for Japanese automakers large or small.  The disaster that shook the island nation two months ago all but shut the industry down for a month and makers will be operating at a fraction of normal levels for some time due to shortages of parts ranging from plastic panels to microchips.

But a massive, behind-the-scenes effort could end the crisis a bit sooner than expected – though it leaves many observers wondering just how much Japan’s home auto industry will be hollowed out in the process.

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Even as manufacturing slowly creeps back to normal, industry officials are warning that they may shift more of their operations – both automotive assembly and parts production – out of quake-prone Japan.

“How much longer should we insist on producing in Japan?” asked Chief Financial Officer Satoshi Ozawa, as the maker announced a 77% plunge in its profits on Wednesday.


Japanese Makers At Risk if Shortages Linger

Inventories could plunge by half.

by on Apr.05, 2011

Will normally loyal import buyers switch if faced with serious shortages of products like the new Honda Civic?

The ongoing crisis in Japanese automotive manufacturing could be the biggest setback brands like Toyota, Honda and Nissan have faced in decades should anticipated product shortages send buyers scurrying to check out competing products.

Dealers could struggle with barely half their normal inventory of Japanese cars, trucks and crossover in the coming months, warns the nation’s largest automotive retailer – while analysts say that rising prices could be an equally influential factor leading to mass defections by normally loyal import buyers.

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Nearly a month after Japan was rocked by a 9.0-magnitude earthquake and subsequent tsunami, a large portion of the island nation’s automotive assembly plants remain out of action or are operating at significantly reduced production schedules.  Though only a few assembly lines were damaged by the disaster, scores of automotive parts plants were impacted.  And compounding the situation, Japan continues to struggle with rolling blackouts in the wake of the crisis at the Fukushima Daiichi nuclear plant touched off by the quake and tsunami.

“Everybody’s in crisis mode,” said Michael Jackson, CEO of AutoNation, the Florida-based retailer that operated 243 dealerships in 15 states.