Toyota Considering Incentives and Increased Warranties

ORLANDO, Florida February 12, 2010; Soyoung Kim and Bernie Woodall writing for

Reuters reported that Toyota Motor Corp is considering increased incentives and an extended warranty program to combat consumer concerns about a deepening product safety crisis, a source briefed on still-developing plans said on Sunday.

Toyota, reeling from its largest recall in history, is discussing a range of options with its U.S. dealers to support sales, including $1,000 in addition to the current $1,000 in cash incentives to returning Toyota customers, the source told Reuters.

Toyota's current $1,000 in "loyalty" bonus matches incentives offered by General Motors Co, Ford Motor Co , Chrysler and Hyundai Motor Co (005380.KS) to lure Toyota customers.

Other options Toyota is considering include a free maintenance program -- such as oil changes and regular mile services -- and a new warranty program that at least matches Hyundai's market-leading 10-year, 100,000-mile powertrain warranty, the source said.

Toyota currently offers a five-year powertrain warranty, or 60,000 miles, according to its website. It also offers a three-year basic coverage warranty for "all components other than normal wear and maintenance items."

The source declined to be identified because the plan has not been made public and has yet to be finalized.

Toyota spokeswoman Celeste Migliore said the company reviews many options to remain competitive for each month, but declined to comment on details.

Don Esmond, senior vice president of Toyota Motor Sales, told Reuters in an interview on Saturday that Toyota will consider "competitive incentives" to attract consumers and take steps to reinforce the brand.

Toyota's U.S. sales dropped 16 percent in January to the lowest level in more than a decade, after it suspended sales of top-selling vehicles subject to safety recalls, including the Camry and Corolla sedans.

AutoNation CEO Mike Jackson said on Saturday that by April, Toyota's sales would return to near-normal levels. Jackson said that for the full year, Toyota's U.S. market share will drop 1 percentage point, from 17 percent in 2009.

AutoNation handles about 3 percent of Toyota's U.S. sales and is the biggest dealer group in the country. About 20 percent of its overall sales are Toyota vehicles.

Esmond said Toyota met with its dealer advertising committee this past week to come up with ideas to bring in more customers.

"We're going to need something to reinforce the brand. I think we'll look at anything and everything," he told Reuters. "We are going to provide the appropriate incentives."

The automaker will also pay for the inventory financing costs its dealers have suffered during the suspension of sales, Esmond said.

Editing for Reuters by Maureen Bavdek