Toyota Motor Corp. (TM) is rebooting its strategy in North
America, giving local executives more say over product and
production decisions after more than three years of losing market
share in the U.S. to rivals.
Chief Executive Officer Akio Toyoda earlier this year overhauled
the company's regional management, assigning Jim Lentz, the area's
former top sales executive, operating responsibility over its North
American operations. Mr. Lentz is using his authority to push for
more distinctive styling for key U.S. models.
Later this month, Toyota will start an early test of its new
approach when it starts promoting a redesigned and more
fierce-looking Corolla, the first major update in six years of a
staid compact that propelled its U.S. sales in the 1970s and
1980s.
Mr. Lentz said Toyota's recent decision to move production of
the Lexus ES 350 luxury sedan to the U.S. shows top executives'
willingness to listen more to its North American managers. They
have gained more influence in the wake of recalls beginning in 2009
following complaints of sudden acceleration that hurt the company's
reputation and sales.
The Lexus ES is sold almost entirely in North America, but it
has always been made in Japan. Building Lexus cars in Japan has
been a source of pride for the company, and moving production to
the U.S. was politically sensitive despite the profit risks posed
by fluctuations of the yen against the U.S. dollar. Soon after
getting his expanded new role, Mr. Lentz pushed to get the ES made
in the U.S.
"Within 30 days we put together our final proposal...and went to
the board. In Toyota terms, for us to do this within 30 days, is
lightning speed," Mr. Lentz said in an interview. "We had all the
challenges figured out. The board had a few questions, not many,
and the program was approved." First U.S. production of the vehicle
is scheduled to begin in 2015.
Its North American operation has gained complete control for the
first time over the designs of several models that sell well in the
U.S., including the Avalon sedan, the Venza wagon and the Tundra
pickup. U.S. executives are getting broader design influence on
other vehicles, such as the FJ Cruiser, Tacoma pickup and Sienna
minivan. In the past, key design decisions were all made in
Japan.
One of Mr. Lentz's biggest challenges, say analysts, is
preventing Toyota from following the path taken by General Motors
Co. (GM) in the 1980s, when the largest U.S. auto maker began
losing members of the baby boom generation to Toyota, Honda Motor
Co. (HMC) and other foreign upstarts.
Mark Hogan, a former GM executive named to Toyota's board
earlier this year, says the company must get more U.S. consumers
excited about its cars.
The new Corolla marks an effort to cultivate younger buyers who
have embraced Honda's new Civic, Ford Motor Co.'s (F) Focus,
General Motors Co.'s Cruze and Hyundai Motor Co.'s (005380.SE,
HYMLY) Elantra. The Corolla for years has been the epitome of the
practical, reliable and bland that laid the foundation for Toyota's
growth in the U.S. market following the gasoline price shocks of
the 1970s.
"We are very pleased with all the styling they've been working
on...I think it will attract a more youthful buyer," says Larry
Kull, owner of a New Jersey Toyota dealership.
But the average age of the Corolla new-car buyer today is 58
years old, higher than the industry average of 55. In 2005, the
median age of Toyota buyers was 51 years old. Toyota now ranks near
the bottom when it comes to attracting new buyers from rival makes,
according to data from auto researcher R.L. Polk & Co.
Toyota is still a highly profitable and powerful force in the
U.S. The company reported $5.63 billion in overall profit in the
quarter that ended June 30. In the U.S., Toyota leads the midsize
car segment with the Camry and dominates the hybrid market with the
Prius.
However, the aging of Toyota's U.S. customer base has coincided
with a drop in market share from a high of 17% in 2009 to around
14% this year. Ford and Hyundai have begun luring midsize car
buyers with their flashy Fusion and Sonata sedans, respectively.
Ford has also made inroads in the hybrid segment with models such
as the C-Max hybrid wagon.
"There is no doubt about Toyota's quality, durability and
reliability," said Mr. Hogan. "But they have been pretty passive on
design execution." Mr. Lentz said car shoppers will see changes
soon.
"Buyers are becoming more emotional about their purchases," he
says. "They want cars that are more fun to drive, with better
styling. I think it really is all about a change in brand, away
from this very rational company. We are going to try to put the fun
back in the car business."
Mr. Lentz said customers should see the influence of North
American designers in the new look of the Avalon introduced late
last year. The large sedan, priced at about $31,000, is lower,
wider and sportier looking than the previous Avalon--and is
outselling the prior model two to one.
Write to Mike Ramsey at Michael.Ramsey@wsj.com
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