Is Toyota Number One in The World?

Special to The Auto Channel
By Marty Bernstein
AIADA Contributing Editor

The first fifty years of growth, success and profitability of Toyota in the United States is unrivaled in the annals of modern business history and especially in the history of the automobile industry.

The special magazine editions published to celebrate Toyota’s recent 50th anniversary are now filed away for posterity, historians and archivists. Auto journalists are wondering what’s next and how to cover it. Business writers are pounding away on keyboards to fill the bookshelves with more Toyota praise and fodder. The MBA mills are churning out case study after case study for future leaders to study, analyze and discuss.

Toyota is the automotive benchmark for business writers, Wall Street Analysts, auto writers, reviewers, journalists, pundits and most importantly – consumers and competitive brands. It has also set the guidelines for super efficient manufacturing processes.

For the sake of simplicity and understanding, let’s call it what it is: Toyota Envy!

Envy, as defined by Webster, is “a feeling of discontent and resentment aroused by and in conjunction with desire for the possessions or qualities of another.” In one form or another corporate envy starts with the product – good looking styles priced fairly, often above competitive models. Toyota has a tight group of generally happy dealers who have invested in growth. The brand has earned outstanding scores and accolades from the multitudes of automotive and consumer research organizations. Customer satisfaction based on brand loyalty is huge.

The Vehicles

Almost every car introduction I attended last year made mention somewhere in the presentation that their new “whatever” is targeted to compete with Toyota’s (fill-in-the-blank) or has been benchmarked by it or deserves to be considered an equal to it.

The new Chevrolet Malibu, arguably GM’s best product in many moons, has received due praise from automotive reviewers. A massive – how about gargantuan – multi-media advertising blitz estimated at $100 million has positioned the car as the new U.S. replacement for Toyota’s Camry.

Ford, during media presentations of the newly returned Taurus last year, clearly detailed Toyota as the benchmark of quality and value with whom they hoped to compete. Ford and GM are not alone. Other automakers, both domestic and international tout their design, engineering, manufacturing and more as “equal to or better than” Toyota’s. The proof is in dealer sales.

Through 2007, the Camry had sales of 473,108 units, up 5.5 percent from 2006 and making it the No. 1 selling car in America. Meanwhile, Corolla models generated sales of 371,390 units, ranking third behind Honda Accord. And certainly one cannot forget the Prius – still the No. 1 selling hybrid, rising in sales 69.4 percent over 2006.

During the last three international automobile shows of the year, Toyota provided attendees somewhat of a preview of cars to come. Across several categories, including their pioneering hybrids, Toyota revealed a host of new, improved, and concept models, turning some auto execs Kermit green. More new models have been promised in a few weeks when the North American International Auto Show in Detroit opens to media.

Financials

Strong sales reports lead to Toyota’s financials, which are gold plated – up a not so modest 13.4 percent for revenues worldwide while profits rose 21.3 percent – during just the first half of its fiscal year, which ended September 31, 2007. Increases are also forecasted for revenues and profits for the remaining months in their fiscal year through March 31, 2008.

Not only are the financial numbers good, the total forcast has been increased to just a little shy of 9 million units worldwide for Toyota’s fiscal year.

All this, while the Detroit Three – the historical leaders in American auto sales – continue to confront their individual devils of restructuring, mounting financial losses, mediocre models, diminished market share, and for two of the three until recently, lagging and lackluster leadership. It’s way too early to evaluate the performance now.

Concurrently, some Asian and European manufacturers are setting new marks for sales and profitability even with the dollar becoming more costly compared to Japan’s rising yen, Korea’s won and the European Union’s euro, especially for German-made vehicles.

To the several car manufacturers who followed the company founded by Mr. Toyoda to our shores, a path was blazed, obstacles were cleared, the Toyota business model was more or less followed. And today Toyota is the driving force in the industry. A revisit to business history over the past century shows, however, most of the “great company’s of their time” are no longer viable, operating businesses through a vast variety of mistakes, poor decisions, bad management and changing consumer likes. When you are No. 1 in an industry – any industry – you are fair game. Everyone takes a shot at you. Do the names U.S. Steel, Westinghouse, Sears, and PanAm ring a bell?

Reputation

A company like Toyota is subject to intense scrutiny from a variety of media sources and pundits. Not all news is good news, much to the chagrin of the corporate communications and public relations staffs. Has Toyota had some not so good news recently? Yes, but nothing really serious.

To gauge this variable I reviewed the first five pages of Toyota hits (20,613) on the Google News (only current items) site. Discounting the new model news, reviews and show info, the top five primarily consisted of these or similar headlines:

Toyota introduces new corporate ad campaign – Good news
GM of Toyota encounters environmentalist in LA – Not so good
Is an anti-Toyota campaign going to start – Not so good
Volkswagen aims to replace Toyota as #1 – Good news
Huge buy-back of Toyota stock – Good news

Not bad for a Japanese company manufacturing in the U.S. Certainly, Toyota has had product recalls, some factory problems and a hint of disagreement with a few dealers over quotas and market share objectives. But nothing terribly serious that might hurt Toyota’s image or reputation.

In fact, during the past year the news has been good, thus the reputation has gained. Toyota is perceived, from my point of reference, as a good corporate citizen. Well, there was the NASCAR brouhaha that had to cause a twinge of consternation and embarrassment. But as the axiom around the tracks goes, “If you ain’t cheatin’… you ain’t trying!”

The company recently increased corporate advertising (aka, paid reputation building) in a new multi-media campaign through clearer, more focused strategic communications. The new ads stress environmental considerations and Toyota’s investments in the U.S. Solid, controlled and guided communications.

The Brain Drain

There have been at least three well-documented cases this year of this concept I call "envy," as the competition hired key marketing and sales executives from Toyota. Chrysler hired marketing innovator Debra Meyer, the former VP of Lexus marketing as its chief marketing officer. This was followed by the appointment of Toyota’s super-executive, Jim Press, to be the president and COO of the new Chrysler.

And, Toyota’s super wunderkind, Jim Farley, the man some say was destined to be president of Toyota someday, gave up running the Lexus division to move to Ford as CMO with plenipotentiary powers from Ford’s new CEO, Allan Mulally.

Follow the Leader

Toyota has not been the leader for the past half century – others have had that rather dubious distinction. Getting to the top in the automobile business means Toyota has had to work smarter than the competition.

While occasionally not the first to do something or launch something new, they’ve usually done it a bit later, but better, faster, smarter and more economically. When they’re first, they are really first, as in hybrid technology. The old rule of “speed, price, quality – pick two” did not have resonance for the company’s management then and does not appear to do so now. They really get it right the first time.

Many of the key executives in Toyota (and other international brands too) today were first trained by the Detroit Three and came from their staffs, but then were honed by a new set of operating rules, procedures and problem-solving techniques. It seems only fair – it’s now payback time. Could it get worse? Time and dollars will tell the tale.

Rather than have way too many dealers selling their vehicles in a market, Toyota opted to limit the number so that each was able to build a profitable business enterprise. They did it without rancor or ill feelings. Less turned out to be more, a helluva lot more. Result: The dealer business model is changing, dramatically.

Bottom Line

The problem with being No. 1 in anything – the top gun, the leader of the pack, the go-to-guy – is simple: Everyone is going to take a shot at you. Just maintaining position is not growth and usually will not assure continued success. It does not take a genius to know that in order to stay a successful brand one must be aggressive, ambitious and often audacious in today’s marketplace.

Complacency has not been an operative word in Toyota… and probably never will, but there are aggressive, ambitious and even more audacious companies who want to topple Toyota from its position of dominance. These are names everyone reading this may already know, and some names may not be as familiar - those hailing from far-distant places like China and India. Either way, the devil is sure to be in the details.

1/9/2008 3:34:46 PM