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By 2g1c2 girls 1 cup

A Chink in the Armor?

10th July 2008

Today, Toyota announced 2 (temporary) plant closures and some reshuffling of their vehicle manufacturing locations – all as a result of the shifting demand away from trucks. The hot-selling Prius, the best selling hybrid in the US and the world, will now be made in the new plant being built near Tupelo, Mississippi. The Highlander, presently built only in Japan, and scheduled to be added to the Tupelo plant, will now be added to the Princeton, IN plant, which presently builds Sequoia SUVs and Tundra full-size pickups. The Tundra, built in Princeton and San Antonio, will now be consolidated in San Antonio. While this giant game of checkers is being implemented, both Princeton and San Antonio will shut down, from early August to early November, due to…ahem…”the declining overall market for full size trucks and SUVs”. Got all that?

OK, I have 2 points to make of all this. First, when Toyota announced plans to sell a “real” truck, many (including a certain former boss of mine) assumed they would be able to sell as many as they could build (which was assumed to be ~225,000/year). 225,000 would have given them 10% of the full-size market in 2006. In 2005, their actual share was 5.0%, rising to 5.5% in 2006 and 8.9% in 2007 (the first full year of the redesigned new model). While the Tundra has done well in an extremely loyal segment, they haven’t exactly set the world on fire. To get the sales, they have had to put incentives on the Tundra, just like (gasp!) GM, Ford and Chrysler. They had as much as $3000 of incentives less than 3 months after launch in 2007. I call that mixed results. Sales have done well, but not as well as some predicted, and they have had to use incentives to do it, when many thought that Toyota would never need or use rebates to “move the metal.”
Second, Toyota has shown why they are about to become the largest vehicle manufacturer in the world (sorry, GM). They have identified a fundamental and maybe permanent shift in the market, and they have taken bold steps to adjust on the fly. These shifts in production will be costly, both to Toyota and their suppliers. But instead of arrogantly thinking, “The customers will come back; they always come back”, Toyota has acted in the best long-term interest of the dealers, suppliers and, of course, themselves. The Detroit 3 can and should take a lesson in corporate responsibility from Toyota. Then again, they should have 25 years ago, but didn’t. When will they learn?
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