With Toyota reeling, Ford and GM can grab the wheel

Posted by: David Welch on February 11, 2010

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Toyota is on the ropes. Some in the commentariat think that the recall issues will blow over like sooty blast of diesel emissions. But I don’t believe it will. Problems keep piling up, with Toyota’s recall of 437,000 of the Prius for brake repairs being the latest. The embattled giant’s recall tally now tops 8 million cars.

Might this be the hole that Detroit’s carmakers can race through? General Motors, Ford and Chrysler have been hoping that their toughest rival might finally slip up and allow them a way to get some consumers back. This could be it. TrueCar, whose Web site tracks vehicle pricing and consumer shopping traffic online, says that people intending to buy a new Toyota declined 12% in January. The biggest beneficiaries were Kia, Honda and Ford, with Hyundai and Nissan not far behind. That means Ford is most likely to catch a tailwind from tempest that is pounding Toyota.

GM could as well, but the company doesn’t have the marketing momentum or the quality image that could get Toyota owners to give its brands a look. But at least GM can rest assured that Toyota won’t be grabbing easy market share for a while. Chrysler’s quality lags well behind the pack, according to J.D. power and Consumer Reports. So it will be tougher for the smallest of the Big Three to sway Toyota customers who are so reliability focused.

Advertising experts think this is a shot for Ford and GM to get in front of some consumers who deserted American metal decades ago. “You have to run through a hole when you see it,” says Lance Jensen, co-founder and executive creative director at ad agency Modernista!, which has done work for Hummer. “We’re talking about capitalism. If I were Ford and GM, I’d make the case that they’re on top now.”

Certainly, there are some things that Detroit can do that could have more impact than the $1,000 rebates Ford, GM and Chrysler have offered for Toyota trade-ins. That approach has a whiff of desperation to it. What can you say for a brand that has to put cash on the hood to get a Toyota owner to ditch his car during this maelstrom? I understand that competition can be bare-knuckled, but it’s also unlikely to work. Ricky Beggs, vice president and managing editor of Black Book, which tracks used-car prices, said he has heard from some dealers who have cut trade-in values anywhere from 10% to 30%, mostly on the low end. Some Toyota owners looking to trade up may need a rebate just to make them whole on lost resale value, but it’s not a great deal. If Toyota resale values rebound as Edmunds.com analyst Joe Spine believes, savvy consumers may think it is better to wait that trading in now when the only bait is a $1,000 rebate.

So what’s Motown to do? Try something a bit more subtle. Here are a few ideas:

• Rather than spend $1,000 per car in rebates to Toyota owners—as GM and Ford have and Chrysler is on select models—use the money to amp up advertising. A purse of $1,000 a car can go a long way.
• Make the advertising very targeted. GM has already been running ads comparing its new models to Honda, Toyota and others. Chevrolet, for example, has ads comparing the Cobalt compact, Malibu family sedan and Equinox crossover SUV to rival Toyota models. Run more of those ads and brag about the attributes. In other words, run with the “May the Best Car Win” campaign, but get some more air time.
• Dig into Toyota’s lineup and see where their cars offer more standard equipment. Whether it’s Bluethooth, a premium sound systems, navigation or whatever, use the rebate dollars to throw in some of those options to match or beat what Toyota has to offer.
• Ford has a real opportunity with its hybrids. The Fusion hybrid gets 39 mpg compared with the Camry’s 34 mpg. The Dearborn, Mich., automaker has been advertising that in local markets. But they should amp it up and do more comparisons.
• This one cuts closer to the edge, but brag about safety. Don’t mention Toyota or brakes or throttles. Talk about any cars that have posted strong scores in crash tests or safety and quality surveys, advises Eric Hirshberg, CEO and chief creative officer of ad agency Deutsch-LA.
• And one more, make a stronger pitch for the Ford Mustang and Chevrolet Camaro, which is pictured above’’. Those cars, both hot sellers, may have taken their styling cues from yesteryear’s muscle cars, but they are packed with technology. The Mustang has gadgets like active park assist, and crash avoidance systems. The Camaro has a 304 horsepower direct-injection engine that gets 29 mpg on the highway. And the car is loaded with airbags.

I especially like the last strategy because it marries Detroit’s muscle heritage with new technology. Both cars would be metaphors for two companies that Toyota once so easily beat. It might work. Toyota is already proving that it no longer is the company that ran circles around America’s carmakers for so long.

Reader Comments

siphandone

February 11, 2010 7:15 PM

I don't think Ford or GM or Chrysler can benefit from Toyota's woes. In contrary, it might be Koreans (Hyuandai, Kai) or another Japanese companies (i.e. Honda, Nissan...)

BIGWEEDS

February 11, 2010 10:48 PM

Folks,
Those people who think that GM and Ford will make gains over the BIG T must be drinking hopped up oil. The BIG T will continue to blow these two bloated companies away. I have purchased 23 cars from the BIG T and will hopefully live long enough to buy another 23. I have never had a safety problem with any of these vehicles. 20 people have died supposedly from safety defects with BIG T cars while over 250,000 people have died in car and truck wrecks over the pass 5 or 6 years. I believe that there is really big problem but no one seems to care enough to address the real problem. AH SO!
Regards

Paul

February 12, 2010 3:08 AM

At the end of the day what will help a company to sell many cars and be successful in the long-term is quality products and that is what GM, Ford and Chrysler have to focus on to win back sales, not just rebate schemes, which have limited effect.

antonio311

February 12, 2010 3:49 AM

how about Chrysler advertising that they have 4 top rated safety picks on the national insurance institute for highway safety awards list for 2009, more than Ford, more than GM & Toyota has not even 1 car on the most safe list??? Chrysler should advertise this heavily!!!!

Jerrel

February 12, 2010 10:03 AM

I have owned toyota trucks for the last 12 years. I still believe they are the best half ton available. I feel the piling on the brand by the media and the gov. is dispicable, this didn`t happen when Ford, GM, Chrysler had major saftey recalls in the past. Cold there be a little jealously going on here?

jj

February 12, 2010 10:22 AM

Don't worry Washington, formerly Detroit automakers will muck this up. They always do. Toyota will have a bad 18 months. There will be changes, they most likely will regress to a simple design. They hopefully will target the lower price model and re-emerge as the top automaker in the next 2 years. I am what the adverage American would call an liberal, but even I think the bailout of the US carmakers was a very bad Idea. Ford will be the only one that can truely take advantage of this, but their debt load will hinder what they can exploit. Asia still has the best cars on the market. I would watch Honda, Hyandi, and KIA to fill in the market.

Vice Magnet

February 12, 2010 10:48 AM

I've never owned a Toyota, opting instead for Mazda or GM (Chevy/Pontiac). Quite frankly I don't see this recall as the one event that takes Toyota down. If GM products continue to be incredibly poorly designed and require the amount of repairs mine did, I'll continue to purchase anything BUT GM products. So far Ford has proven they can adapt to the new market conditions and I hope they can continue. I just don't see this as the death knell to bring Toyota to their knees when you take into consideration how the products have otherwise stood up well over the last 20 years.

Cameron McNaughton

February 12, 2010 11:13 AM

I agree that the use of incentives is absurd. these Toyota owners paid full whack for their cars, they're looking for quality. Detroit is just going to its standard playbook. What happened to the idea of selling the prodcut based on it's own merit. More at:

Cameron McNaughton
McNaughton Automotive Perspectives

jambo

February 12, 2010 11:45 AM

Honda/Subie/Hyundai/Ford and others will benefit. Not GM/Chrysler.

MMM

February 12, 2010 11:58 AM

It's funny how some companies are pointing a finger at Toyota now like they never had the same kind of problem; e.g., the death-trap-on-wheels called Bronco.

Mark

February 12, 2010 1:08 PM

It's disconcerting to witness the frenzy building around Toyota's troubles. It has been misreported by many so-called experts who allow their patently obvious 'home-team' mentality to colour their comments, including Business Week. Read this link for a slightly different take on the whole situation http://www.thetruthaboutcars.com/the-truth-about-nhtsa-complaints/#more-345127
I personally believe that some of Toyota's competitors who have smelt blood and unscrupulously attempted to exploit the situation are behaving in an unethical manner. The irony of GM or Ford touting their quality standards seems to be lost on the broader American public. Or does the widespread economic malaise somehow justify this blatant bloodletting?

MacGuffin

February 12, 2010 1:19 PM

I've always been a big fan of David Welch, but I disagree that this is something that Toyota can not recover from.

Toyota has oodles of good will built up over 20+ years. Yes, that has been shaken to some degree, and Toyota has completely botched the counter measure (not fast enough) and the PR, but 12 months from now Toyota will be 95% recovered from it.

The bigger problem is rediscovering its mojo, which Toyota seemed to have lost as soon as it beat GM to become the world's #1 automaker. Toyota needs a good insurgent strategy, because it works best as an underdog.

Toyota got too arrogant, based on nearly a decade where they blew by every sales goal with ease, while growing too fast and forgetting what made them successful in the first place: Bullet-proof Quality, Reliability and Durability.

sheth

February 12, 2010 1:50 PM

the problem with the media is that they are acting like this is Toyota's FIRST and ONLY error. This is simply the biggest error. Toyota's vehicles have largely been getting middling reviews for a few years now. The interiors are cheap and in many cases the technology is second rate. The Corolla still uses a 4 speed automatic which is 25 year old technology. Toyota's styling has never been exciting but in the past people would accept that because they thought the quality was stellar. Now consumers are realizing you don't have to own a dull car to get a good car. Ford has passed Toyota in January sales and Edmunds predicts they will pass them for all of 2010. Those thinking GM/Ford wont be able to take advantage of this are mistaken. The folks who think Toyota can take a year off and then come back to full strenght arent familiar with the market. VW, Ford and hyundai all have strong lineups and Hyundai/VW are going after every bit of martketshare they can get. VW wants to triple its sales here within 8 years. Toyota had little room for error but it may be too late.

CJH

February 12, 2010 4:20 PM

I have owned a lot of GM cars and have had a lot of repetative problems...intake gaskets, brake rotors and automatic transmissions were the worst of many more. I now have a Honda Civic and Honda Pilot. I used to think having car problems was just normal and the problems were random. Now I realize most problems are repetative and that some cars are largely trouble free. See ya later GM!

hezman

February 12, 2010 5:53 PM

It's about time the real Toyota has been exposed. Paying lots of $ for boring cars with quality problems baffles me. I drive GMC trucks and Ford SUV products that have some panache and are great quality. Here's a prediction: with Mullaly around, Ford will be the company to beat in 2-3 years!

Clyde

February 12, 2010 9:00 PM

I no longer considered GM, despite the recent failures of Toyota. Toyota could fold up or go away, it would not change my mind about GM. I love my Jeep, but not Chysler.

terry gardner

February 12, 2010 9:32 PM

I have been a loyal Toy purchaser for 25 years — that’s 8 vehicles. Recently they wouldn’t even replace a shock on the back lift gate of our Sienna that just about took out my 7 year old daughter. My most recent purchase was a trade in of a Tundra for a Subaru Outback. I’m no longer loyal to Toyota.

For those of you thinking the quality issue is only connected to recalls you are near-sighted.

Plainer

February 12, 2010 10:03 PM

Before any auto company tries tries to capitlize on Toyota's woes, they'd better make sure their products aren't subject to the same problems. Most auto companies rely on the same suppliers.

Plainer

February 12, 2010 10:03 PM

Before any auto company tries tries to capitlize on Toyota's woes, they'd better make sure their products aren't subject to the same problems. Most auto companies rely on the same suppliers.

Lete

February 13, 2010 12:10 AM

I don't blindly trust a T as many do. I bought a car that I don't know it has a problem (oil slug) then I had bad luck. If I know and still buy a safety defect car and trust a company willingly hid safety problem, I'm really dumb.

Karl

February 13, 2010 11:00 AM

I can't wait until Tata makes their Nano available in America. Not having a car payment will make life much easier for the average American who can no longer afford cars like Toyota. Just think, a car for the "people". P.S. Anyone can 'Google' this- TATA NANO, and watch the videos on the web, right?

Ken

February 13, 2010 12:01 PM

The major auto companies have had a McMansion Mentality when it comes to pricing their cars. When I bought my first car a 2 or 3 year auto loan was standard, allowing for rapid turnover for both the consumer and the automaker.

Today people get a 5 or 6 year loan and are upside down for years.

That makes it harder for any company to take advantage of Toyota's problems.

But Ford & GM do have opportunities. Customers are going to look for protection (very good warranties), features and pricing.

Maybe Ford and GM will beat Toyota by competing with the Korean automakers. That is where the emerging competitors are and the US companies need to focus on them.

Schmeltz

February 15, 2010 9:47 AM

David:
I think every one of your suggestions were very good, and it would behoove the Detroit Companies to try them. But sadly, I don't see a lot of market share being ceded to the Detroit companies or any others for that matter from Toyota. People in general have very short memories. When this storm finally blows over, (and it eventually will), people will have long forgotten and forgiven this little event, and return to the Toyota stores. Toyota as a company has done many things well over the years, and although this proves they are indeed "human" for lack of a better word, they have still banked enough good will to see them through this. The only thing I could see having permanent damage on Toyota would be if they were found to have illegally covered up some things, or later find that an electronic malfunction is the true culprit in the accidents rather than the sticking pedals and floor mats they are currently pursuing.

ponySS

February 15, 2010 7:26 PM

Whoa man, I just can't get over how mean that new camaro looks...

aldol

February 16, 2010 1:15 PM

I think that Toyota has a problem bigger than what is described above.
It is not just the recalls. Toyota's image is tarnished from 7 years of poor quality.
in addition to the recalls, the lawsuits that will be piling up will be in the thousands . after all lawyers need to eat too :). My guess that the legal costs will be 10 to 20 B (Billions)

Prostar

February 17, 2010 12:10 PM

I drive a toyota and I love it.

alan

February 17, 2010 2:13 PM

Same stuff I always read. How the Toyotas of the world are problem free. If you would have had the insight to maintain your GM/Ford or Chrysler as you do your Toyota,Honda,Nissan you would still be driving a GM/Ford or Chrysler. I used to work at a Ford/Nissan dealer in the 80 and 90s. It was amazing how much different the customers were. Nissan customer came in and asked for their 15,000 or 30,000 mile maintenance for $400 without a flinch. Couldn't even get a Ford customer to take care of their car like that. Mention a 30,000 service and they would say I change my own oil. Tell them it's more than just an oil change and they would say "my dad never had to do all that on his Fords. Just a totally different state of mind when it comes to maintaining a vehicle. That's why the Nissan customers were happy and the Ford customers were always bitchin because something broke. Think of it as going to the dentist, do you only go when you have a tooth hurting? Who complains about it. Is it the dentist fault or yours. nuf said.

Nghi

February 20, 2010 12:31 PM

Say what you want about American Auto Manufacturers, the one thing you cannot say is that they crank out a boring car. I hear a lot of complaints about interior and the like but with the most recent cars everybody is on the same playing field, sort of. I understand American Manufactures have nobody to blame but themselves for the loss of consumer confidence in the car segment, choosing to squander their dominance to focus on SUV's and trucks.
What I see from American companies is a big push for new engine technology such as Direct Injection. More great and innovative options like Ford's Sync (I mean play music from your phone, how cool is that.) Across the board American Companies are giving more performance per dollar with great reliability.
Japanese manufacturers play it safe, reusing the same old technology and re-badging it then charging a premium. If Honda or Toyota made a car like the Cobalt SS Turbo it would cost almost 40k.

Scott Thomas

February 23, 2010 9:32 PM

Toyota & Honda dropped the ball on handling the recalls , they should have came forward with a full disclosure. Instead of waiting for a huge media blitz and tons of public pressure. But Toyota & Honda are not alone , I never seen so many car companies having recalls all at the same time. I had no idea my car which is not even a Toyota or Honda, was affected until I searched on http://www.carpedalrecall.com and found I had a bad Anti Lock control unit on my 2008 Pontiac G8 , So be careful check daily, it seems more and more cars are being recalled .

dave way

April 17, 2010 3:37 PM

to BIGWEEDS
22 vehicles? that's a car every 3 1/2 years. You are definitely someone who buys Toyota cars. You boast these high miles yet you drive them 40,000 miles. Congrats you made every very Toyota supporter after your post look bad(Toyota has every right to sell products here). Can i get a round of applause For Mr.BIGWEEDS?!!!

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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