Toyota's loyalty lead

"Toyota Motor may be experiencing its share of quality slips and bad
press about not being as 'green' as its reputation suggests, but Toyota
customers have been re-upping with the Japanese automaker at a rate
that makes rivals envious..."

Business Week article: http://easyurl.net/4c5

 

It took 20-30 years of the Big Three producing bad quality crap before
they lost their loyal customer base. People aren't so trusting anymore, but
I reckon that Toyota will still have about a decade that they can push crap
into the customer base before they will start to feel kickback from it.

The thing is, though, is that the profits for selling crap on a good
reputation
are so high that companies that start doing this end up getting addicted to
it. Toyota has slipped on quality before - the Tercel is a perfect
example -
but managed to pull back from the brink. This time around, only time will
tell.

But this much I WILL say. If Toyota is able to maintain high sales volumes
with crappy quality for 4 years, by then the internal hubris will be so high
that they will never return to building quality until they lose the market
and have to start over from scratch (much like the Big 3 are doing now)

Ted

 

GM is only slightly behind Toyota in loyalty.
You could have just as easily headlined the article:

"GM Beats Honda, BMW, Ford, Subaru, etc. in Customer Loyalty"

http://money.cnn.com/2007/12/06/autos/jd_power_retention_study/index.htm?source=yahoo_quote

Toyota Motor Sales USA, Inc. 68.9%

General Motors Corp. 64.7%

American Honda Motor Co. 63.3%

BMW of North America 56.9%

Ford Motor Co. 54.4%

Subaru of America, Inc. 51.2%

Hyundai Motor America 50.9%

DaimlerChrysler 50.2%

Nissan North America 47.6%

Maserati North America, Inc. 41.9%

Porsche Cars North America 41.6%

American Suzuki Motor Corp. 39.6%

Volkswagen of America 38.8%

Kia Motors America 32.8%

Mitsubishi Motors 31.7%

Isuzu Motors America, Inc. 1.6%

 

Gets pretty bad down at the other end. I wonder how VW was back in the days
of the Beetle and Rabbit.

 

I owned a 56 VW cabriolet -- back in my college years. 36 hp and no gas
guage. In those days, there were'nt very many options. For example, the
Renault Dauphine, Hillman Minx, and of course the Corvair. The Toyopet was
rarely seen in the States. Saw most of then in Japan. The mid to late 60s
saw quite a change, though.

 

Sheep.

 

The Beetle was the best selling car in history, no shortage of loyalty
there.
The Rabbit also sold well and were fine to own and drive - unless you were
fool enough to get a Diesel or gas fuel injected Rabbit. Of course, after
about 10 years the window seals in the Rabbits all started leaking and the
interior
of the vehicle would fill up with a couple inches of water. Great for the
travelling
mold show.

Ted

 

I work with a bunch of folks who would sooner die than drive something
besides a WV. I think they think it "says something about them," but I
have no idea what that something is.

I think it says" I like to pay too much for ugly, unreliable cars."
Excepting the Beetle, of course... it's not ugly.

 

Isn't there another way to look at this? 45.4% of the people buying Fords
are trading in something else. Isn't that possibly a good thing for Ford?
Maybe the headline could have been "Ford Captures New Sales From Other
Brands." Suppose 100% of the people buying your brand were people that owned
your brand, would that be a good thing? It would show a lot of Customer
loyalty, but it would also mean you weren't capturing new Customers. I have
to wonder what the ideal number would be. Probably one reason Scion numbers
were so low is that it is a new brand, so there are not many "old Customers"
with cars to trade in.

I guess this is like a lot of statistics - the meaning is determined by the
people reporting the statistics. Which brings me back to one of my
perceptions - the press loves Toyota.

Ed

 

the paradox is that the lower the price class of a brand's entry level
car, the more important it is to build buyer loyalty. Hence, Toyota's
attempt to go downmarket and attract youngers with the Scion......lots
of years for repeat purchases.

How many Maybachs is someone likely to buy. At one time, Studebaker had
one of the highest loyalty/repeat buyer rates in the business:
unfortunately, they didn't attract new & younger buyers......and
something happened to all their loyal buyers: they died.

 

Well, no. That's not what the numbers say. They're saying "of people
whose last car was a Ford, 54.4% are buying a Ford this time" --
they're losing half their customers on the next purchase.

"Of people who bought a Ford, x%'s last vehicle was something else"
would be a different statistic. And it's the other statistic the
automakers want: capture from other makers.

Certainly true. But, really, the actual headline and story are very
accurate and spin-free: they report both that Toyota's customer
loyalty is No. 1 (excuse me while I go get some Tums -- my daughter
loves the Damned Toyota truck that is the most reliable vehicle we've
ever owned for 206K miles now, but is a bigger pain in the butt to fix
when it does finally break than every other vehicle we've ever owned
combined -- thanks, my heartburn is better now), and that GM's is, in
their words "close behind".

 

They also built some of the most beautiful cars of the 1950s, with
such thin metal in the frames that the cars died too. Early. Killing
that beautiful customer loyalty they'd had.

Studebaker-Packard -- should have been a perfect match. Sort of like
DaimlerChrysler, now that I think about it....

 

After reading the actual JD Power Press Release, I see that you are correct.
It is not that 54% of the people buying a Ford traded in a Ford, it is that
54% of people who bought a Ford last time, bought a Ford again. I wonder how
someone like myself figures into these statistic. In the last 22 months, I
have bought three new vehicles, two Fords and Nissan. I didn't trade
anything in. But one of the vehicles I sold was a Ford, one was a Pontiac,
and one was a Mercury. Not to mention a couple of other vehicles I got rid
of in the last three years (a Saturn and two other Fords). If they had
surveyed me in Feb of 2006, I would have said I replaced a Saturn with a
Nissan (but not exactly directly). If they had asked in July 2006, I would
have said I replaced a Pontiac with a Ford. And if they had asked in
December of last year, I would have said I replaced a Mercury with a Ford. I
am getting ready to buy two more cars (one for my Sister and one for my
older son). It is likely I'll get a Toyota for my Sister to replace a Honda,
and a Mazda for my Son to replace a Honda. So am I personally destroying the
Honda retention rate? Interestingly, if I was buying a car for myself, it is
likely I'd replace a Ford with a Honda. And next year or the year after when
I need a new truck, I'll probably replace a Nissan with either a Toyota or a
Ford (depends on whether or not Ford can fix the F150 for 2009 - I hate the
current F150, the only worse truck is the horrible carton Tundra - at least
I could still get a Tacoma).

Ed

 

So far, ALL of this supports my claim which I started realizing a few
years ago: Toyota today is the GM of 1970. They have market dominance,
they have repeat buyers, they have a long track record, but their
product is declining at an incredible rate. Next thing you know they'll
bring out their equivalent of the Vega (oh wait, they already have
Scion), and they'll start putting small-car components in 3-ton
vehicles ala TH-200 transmissions in Oldsmobiles (oh wait- they already
have the Tundra with its crap brakes and defective camshafts...)

 

Don't forget Toyota, like GM and Ford before, will soon start cost cutting
measures to increase profits at the expense of quality and reliabilitiy - oh
wait they are planning just that....

"Watanabe: Toyota will save $2.7 billion a year

Reuters
December 11, 2007 - 6:50 am ET

TOYOTA CITY, Japan (Reuters) - Toyota Motor Corp. expects to accelerate its
cost-cutting efforts next year to save more than $2.7 billion annually, its
president said today, as the world's biggest carmaker seeks to offset rising
commodity and development costs.

"We would expect to exceed what we've done under the previous plan,"
Katsuaki Watanabe told Reuters in an interview at the company's headquarters
in Toyota City.

That amount should grow every year along with rising sales, he said, as cost
reductions would be made on a per-vehicle basis.

Since 2005, Toyota has been working on a new cost-saving strategy dubbed
"VI" for Value Innovation, which seeks to lump some of the tens of thousands
of components in a car into modules and systems. The first car to
incorporate the new scheme, a remodeled Crown sedan, is due out early next
year.

"I believe the strategy is basically proceeding as planned," Watanabe said.

Toyota has given scant details on the program's target, saying only that it
expected the impact to be faster and bigger than a previous plan to cut the
price of individual parts.

That plan, called CCC21 (Construction of Cost Competitiveness in the 21st
Century) and led by Watanabe as purchasing chief, shaved $9 billion off
costs over five years, and executives have said it had the capacity to
eliminate 300 billion yen in costs every year. That is equivalent to around
13 percent of Toyota's operating profit of 2.24 trillion yen last year.

The ability to reduce costs has been Toyota's forte, allowing it to pour
money back into developing new models and attract drivers around the world.
Toyota began selling the Prius, the world's first gasoline-electric hybrid
car, 10 years ago and is still one of just a handful of carmakers to
mass-produce the gas-sipping vehicles.

"The fact that they're planning to build on the CCC21 plan is remarkable,
and attests to Toyota's unique strength as a high-volume carmaker and its
group companies' solidarity," UBS Securities auto analyst Tatsuo Yoshida
said.

"It'll give them a free hand to use their resources flexibly, including
securing even more customers by building more attractive features into their
cars," he said.

CRUCIAL 10 PERCENT

Slashing production costs is even more important as commodity prices keep
climbing, environmental and safety standards rise and consumers migrate
towards smaller and lower-margin compact cars to get better mileage.

At the same time, Toyota has promised to reach and sustain a 10 percent
operating profit margin. Already its margin is the highest in the sector, at
9.3 percent in the year to March 2007.

Watanabe said reaching the 10 percent margin was "crucial" to be able to
invest to the tune of 1.5 trillion yen a year each on facilities and R&D to
develop safer and more environmentally friendly cars.

The VI project will be incorporated into each new model that Toyota rolls
out from early next year, meaning the effect will grow from year to year,
Watanabe said.

"The full impact will be seen probably around 2010," he said, adding that
Toyota would step up its cooperation with North American and European
suppliers to expand the cost-cutting activities beyond Japan.

TARGETING WEIGHT

Watanabe, known in the company for his "big-picture" vision, is looking
beyond the ambitious VI project.

By 2010, the 65-year-old executive said, Toyota will likely have crafted a
new scheme to replace the VI plan.

"By then we'd be looking at the car's design as a whole, for example by
using lightweight materials," he said.

"I don't want to divulge too much, because this is really a corporate
secret," he said, but added that there was a hint in the 1/X concept car
shown at the Tokyo Motor Show which weighs just 420 kg -- one-third of the
Prius, with twice its fuel efficiency.

Toyota is the world's most valuable automaker, with a market capitalization
of more than $200 billion. Its revenue reached $215 billion last business
year as sales grew in North America, Europe and China, although Toyota is
conspicuously behind in the budding Indian market.

Toyota has forecast sales of 9.34 million vehicles this year, including
units Daihatsu Motor Co. and Hino Motors Ltd., likely toppling General
Motors as the world's top seller of automobiles. Excluding GM's
minority-held Chinese joint venture, Toyota ranked first in 2006.

By 2009, Toyota aims to expand sales to 10.4 million a year.

 

With the Beetle VW had the only low cost small car that stood up to NA
highway driving at that time up to 65 mph and also had excellent
straight ahead traction. Snow tires weren't necessary, but added weight
in the small front trunk was necessary for front traction.
The Beetle was loved by it's owners, me included, although it had
several serious shortcomings. For example mufflers were good for only
about 2 yrs. I haven't replaced a muffler since the stainless steel ones
came out in the late 80s.
When passing another VW Beetle it was common to wave.

I family near me drive two restored VW Beetles, I don't understand why,
considering the number of much better small cars there are now days.
In fact those polluting old VWs shouldn't be used as a regular car.

The coming of the Japanese cars in the 1970s had a serious negative
affect on the Beetle. I loved my 1970 Datsun 510!
So before I got into the Rabbit, I was gone to better cars.

We did have two Chrysler Horizons with the VW Rabbit engine that had
valve seal problems; thank goodness Chrysler soon came out with their
much better 4 cyl engine.

 

When was that? <G>

 

About 1979 or 1980- the 2.2L SOHC, although it continued to improve
through the era of the 2.2/2.5L "common block" engines of the late
80s/early 90s. It was built for turbocharging from the get-go, and
remains the most successful mass-produced turbocharged gasoline car
engine to date. The main and rod bearing shells on the 2.2/2.5 are the
same size as the 440 and 426 hemi main and rod bearings. You *CANNOT*
destroy the bottom end of a 2.2/2.5 if you ceep the oil in it. FWD drag
racers run the turbo 2.2 way up over 20 psi of boost and get 400
front-wheel horsepower pretty reliably- most failures are due to letting
it lean out and burning a piston. The head clamping force is at its
limit around there too, but the bottom end could probably hit 600
horsepower or so. Its a little brute of an engine.

The current Chrysler "world engine" 4-cylinder may be smoother and more
refined, but ultimate strength-wise its a piece of play-doh compared to
the 2.2/2.5 engines.

 

It was a joke. <G>

You're talking about the engine used in the turbo K-Cars, like the
LeBaron. Easily recognizable by the trail of blue smoke!

 

Well, it was an attempt at one. :-D

No, you're remembering the Mitsubishi 3.0L v6 not the 2.5 turbo. You
used to be able to pick 3.0 powered LeBarons and Minivans out of traffic
when you couldn't even see the car! After, oh, 1989 or so about 90% of
LeBarons and almost all the minivans got the Mitsu engine. The few
people that sprung for the 3.3 v6 were MUCH happier with their
minivan... and so were the people that had to drive behind them. Same
for the small percentage that opted for the turbo LeBaron instead of the v6.

I'm not sure I've ever seen a smoking 2.2/2.5 unless it was the turbo
itself, usually something causing back-pressure in the oil return line.