Toyota in Texas: Godzilla Raids Again

As a boy in Houston, Texas, in the fifties, I loved the old Santa Rosa theater.

On Saturdays, they had a sci-fi matinee for kids. $.25 admission, or buy a T-shirt for $.77 and get in free forever, just for wearing the cool shirt.

Better yet, shirt wearers got to strut right past the other kids waiting in line and grab the best seats (front row, where you looked up and were engulfed by the spectacle).

I saw about 100 B-grade sci-fi movies over a 3 year period for 77 cents: what a bargain.

Wish I still had that magic shirt.

In a famous Japanese sci-fi film of the 1950's, American nuclear weapons testing creates a huge, inexorably advancing reptillian beast. A man crawls out of the ocean, sole survivor of a destroyed ship, and whispers "Godzilla", in Japanese.

Que the scary music, the unstoppable monster from the Pacific rim has taken a new form. Now it's called "Toyota-zilla."

But the special effects monster was just a stunt man in a rubber suit, Toyotazilla is real.

The new beast from Japan now roughly equals General Motors in vehicle production.

First quarter 2007 global auto sales exceeded General Motors, briefly making the Japanese automaker the world's top vendor.

Rising From the Sea

The rise of Toyota is based on simple logic: build affordable cars for the middle market at a quality level slightly above the competition. Meanwhile the US competition has focused on creating a marketing fad: the high end gas guzzling SUV/pickups that middle America never could afford without constantly refinancing the ranch.

When Businessweek online named top brands for 2006 the list looked like this; Coke, Microsoft, IBM, GE, Intel, Noika, Toyota...

When first introduced, these cars were ridiculed as "toys." But by the late 1970s, Toyota quality levels began to impress. Today, they set the standard for quality and manufacturing systems.

Toyota's US market share has grown to over 16 percent.

Toyota US sales were up 12% for 2006, with the ubiquitous Camry, at around 450k units moved, America's top-selling car again.

Toyota Division (not counting Lexus) posted best-ever March 2007 sales of 213,820 vehicles, up 8.7 percent year over year.

Toyota controls 27% of the retail market in upscale and trend setting California.

A recent rental of an Avalon sedan during an Illinois blizzard impressed every member of my very discriminating family. These are really good cars.

They have cleverly created a coherent brand identity without relying on heavy styling, as Chrysler has tried to do. The brand is perceived as "value."

Culture Club

The driving philosophy behind Toyotazilla's success is worlds apart from US and European automakers.

Management bases decisions on long-term goals, even to the detriment of short-term financial targets.

Organizational learning, humility, employee job security, absence of antagonistic union vs. management split, world class just-in-time production systems, brand-coherence, and profitability round out the contrast with western auto builders.

This is a conservative company, not a tech innovator, like Chrysler or Honda.

Toyota tends to recycle proven technology from existing models, producing less expensive products, happy buyers, and fewer quality glitches.

The company anticipates a $13.4-billion profit for the fiscal year ending in March of 2007, and sales of 3 million units in North America in 2008.

Toyota currently has more cash than GM, Ford, and Chrysler together, and a market capitalization over $US200 billion.

I think the real challenge for the company is not to let success go to its head. All the trappings of Zen won't make up for a creeping arrogance which recalls GM before the fall.

I am starting to see $800 dealer additional markup stickers for "glass etch."

This etch trick insults consumer's intelligence. Readers are encouraged to walk away from any dealership exhibiting this sucker's ruse.

There are legitimate dealer add-ons, like a quality dark window tint in southern states like Texas, that add real value.

Or just post an additional dealer markup, why the scam mentality?

A recent visit to a nearby dealer revealed bored working class Corolla customers waiting on slow paperwork. My family, there to test drive a full-boat Avalon, got plenty of attention.

(My oldest son, an MBA, hasta have something classy, he ignores his working-class dad's Honda Accord recommendation.)

Quality Slippage on Some Toyotas

Toyota's other challenge is to remain focused on quality as it expands, building new plants outside the home country.

As recently as the 1990's Toyota had the worlds best quality. Today others have reduced the gap, as a spate of recalls and other issues embarrassed the company.

Transposing their production methods to non-Japanese environments rapidly enough to maintain the pace of expansion has proved frustrating.

Back in the home country, a boomtown atmosphere prevails, with overwork, especially among engineering staff, a problem.

Toyota continues to dominate J.D. Powers' car quality survey despite the missteps. Once the growing pains are past, I believe they will be tops everywhere again.

Toyota got caught in the 1996-2002 oil sludge debacle, with thousands of angry owners joining a class action lawsuit. See link at bottom of page for more on oil sludge.

In J.D. Power and Associates 2006 Initial Quality Study, Toyotas and Lexuses held 11 of 19 top spots.

There is no reason to hurry, slow the assembly line down to a reasonable speed and let engineering staff get enough rest. A little product shortage hasn't hurt the reputation of the Honda Civic, it wouldn't hurt Toyota either.

To put this in perspective, we are still talking about fewer US 2006 model recalls than Honda, Nissan, Chrysler, Ford, GM, or VW.

This is the world's most successful car company, as evidenced by my top criterion: customer loyalty.

In the J.D. Power and Associates 2006 Customer Retention Study, Toyotas ranked first out of 37 makes. An unprecedented 63.9% of those surveyed returned to purchase another vehicle.

Product Pipeline

Toyota this year is spending more on research and development than any other builder. They will start using clean diesels by 2008, well ahead of most competitors.

Second generation hybrids, a new diesel, and a plan to overhaul their engines and transmissions by 2010: not bad for a conservative company.

Toyotas and Texans

Toyota's 1,220 dealers averaged a phenomenal 1,612 vehicles each in the U.S. last year. That's enough to make real money just by selling cars. The network is not over dense, but some dealerships will always be poorly run, no matter how successful the franchisor company.

The move to San Antonio, Texas, with an all-new pickup plant, shows the company's ambitions for the Lone Star State.

Toyotazilla has shown world class execution in a congested global auto business.