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Good News for Advertising Industry – Auto Manufacturer Spending $1B Big!

Toyota plans marketing blitz to reverse U.S. slide

By Bernie Woodall and Kevin Krolicki

DETROIT (Reuters)

- Toyota Motor Corp is preparing a $1 billion marketing campaign to boost flagging U.S. sales, expanding hybrid models under the Prius name and allowing its dealers more room to keep pricing competitive.

The moves by Toyota reflect some of the first big changes in the way the top global automaker is running its business in its largest single market since Akio Toyoda took over as president in June.

Toyota dealers at a meeting with Toyota executives in Las Vegas this week were told that the automaker would adjust pricing on new Toyota models by widening dealer margins to give sales representatives more leeway to close deals with car shoppers.

The changes were described by dealers who attended the briefing and confirmed by Toyota spokesman Irv Miller. About 1,400 Toyota
and Lexus dealers attended the meeting.

The $1 billion Toyota has budgeted for fourth-quarter marketing is about 30 percent to 40 percent higher than the automaker would typically spend in the quarter and will include funding for stepped-up advertising and incentives, Miller said.

In addition, Toyota told dealers the company would offer lower-rate lease deals because of higher resale values and would refrain from raising prices on the next vehicle to launch in the U.S. market, the 4Runner SUV, people who attended the meeting said.

Dealers said the steps show Toyota’s new management led by Toyoda — the grandson of the company’s founder — is serious about reversing a recent slide in car sales that hit it harder than more nimble rivals led by Hyundai Motor Co.

“The message is that Toyota is going on offense,” said Pete DeLongchamps, a vice-president at Houston-based dealer group Group 1 Automotive who attended the meeting.

Group 1, one of the largest U.S. dealership groups, counts on Toyota and Lexus for 35 percent of its overall sales.

“We’re feeling pretty good about our 35-percent position right now,” he said.

By widening that dealer profit margin, Toyota is giving its dealers a better return on new car sales and making it easier for them to offer car shoppers a higher price on a used-car trade-in, dealers who attended the meeting said. The changes to the vehicle pricing will vary model-by-model, dealers said.

The plan comes as Toyota struggles with its worst downturn since it was founded in 1937. Toyota’s decline in sales of 29 percent in the United States through August has been in line with the slide in overall U.S. auto sales.

PUTTING THE PRIUS ON CENTER-STAGE

In a move intended to take advantage of its market-leading position in hybrids, Toyota also will add one or two variants to its Prius line-up, Miller said. He declined to provide a timetable.

Toyota executives in Frankfurt this week said the company planned to sell 500,000 to 600,000 hybrid vehicles globally in 2009.

The Prius has dominated the hybrid market since it went on sale in the U.S. market in 2000. The new version, the third generation of the aerodynamic hatchback, accounted for almost 60 percent of all U.S. hybrid sales this year despite new offerings from Ford Motor Co and Honda Motor Co.

“They are getting back to the basics for Toyota, which is making fuel-efficient cars at an economical price,” said Jim Ziegler, a dealer consultant based Atlanta.

 “They are also drawing a line in the sand with the Prius because right now Ford Fusion and Honda Insight are making a run at the hybrid market.”

The dealer discount — or profit margin — is the difference between a vehicle’s retail sticker price and its wholesale cost offered to
dealerships.

By widening dealer margins, Toyota is taking advantage of its relatively stronger financial position.

 Rival General Motors Co, which rolled out its own more aggressive ad campaign this week, has asked its dealers to accept lower margins.

One model singled out for attention at the Toyota dealer meeting this week was the 4Runner sport utility vehicle, dealers said.

A redesigned version of the 4Runner is to make its debut next week in Texas. The vehicle has been the automaker’s worst-performer in terms of sales this year.

Sales of the 2009 4Runner, which has a starting sticker price of $28,640, are down 63 percent from a year earlier amid a collapse in
demand for truck-based SUVs across the industry.

Toyota told dealers it would keep pricing on the new version of the SUV unchanged, holding the line against price increases that often follow redesigns.

That move could be costly in the short run. The 4Runner is manufactured by Toyota at its Tahara plant in Japan and exported to the U.S. market. The yen has been strengthening against the dollar since early April.

Many of the details from the Toyota meeting were reported first by the Wall Street Journal.

(Reporting by Bernie Woodall and Kevin Krolicki; editing by Lisa Von Ahn, Andre Grenon and Carol Bishopric)

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