The $64,000 question that the domestic auto industry is asking is whether that new full-size Toyota pickup is strong going uphill.
The question is as much figurative as literal because the full-size truck market is the last bastion of Big Three dominance and profitability, and the new offering from Toyota faces a formidable climb to prominence and profitability.
The Toyota combination to the Big Three’s lock on profitability is 40-36-1: specifically, Ford Motor Co. owns 40 percent of the domestic big-truck market, General Motors Corp. 36 percent and Toyota 1 percent.
That might change somewhat with the debut Friday of the “new and improved” full-size Toyota pickup, the Tundra, with a big splash at the Indiana State Fair.
“We’re planning on selling the new vehicle next spring,” said John Hanson, national product news manager for Toyota. “Our capacity at the new plant is 100,000 units annually, and we think we’ll sell every one of those.”
Hanson said Toyota has been looking at that full-size pickup market for a long time, “since the T100 (with a V-6 engine), which was not the specific truck this market was looking for.
“Basically, you have to have a V-8 engine with the required towing capacity and payload or you’re just not a serious contender in this segment. So, we’re no big threat to the Big Three right now, but it is a start in a very important segment.”
If there’s a difference between 1998 and 1978, when Toyota and the other imports began to storm the domestic family car market, it’s that this time around the Big Three know they’re coming.
Detroit also knows that Toyota’s parent in Japan is in the best capital position of any automaker in the world and has billions of dollars to chase whatever automotive market segment it chooses.
But the recent economic turmoil in Japan and Asia may force Toyota to be careful how it spends its billions.
Besides, auto industry analyst Lee Sage of Ernst & Young, the accounting firm’s worldwide automotive consultant based in Cleveland, says that even if Toyota succeeds, it does not necessarily mean a full-scale import invasion of this domestic stronghold.
Daimler-Benz AG in Germany and Nissan have announced a joint-venture pickup truck for Asian markets in 2002, but, according to Sage, “Nissan is strapped for cash right now and simply can’t afford a big, billion-dollar product rollout.
Honda is concentrating on what they do best and that’s family cars.
“That leaves Toyota to go it alone, but I think this truck is going to do well–quality and reliability are up at Toyota and I think they may have gotten it right this time around,” said Sage.
The Toyota truck rollout comes on the heels of a 54-day strike by the United Auto Workers that crippled GM’s North American production to the tune of $2.2 billion lost from 600,000 cars and trucks that were not made in June and July.
Despite being distracted by the recently concluded strike, GM remains confident of defending its truck turf.
Two factors are at play. One is that the Toyota T100 landed with a thud in the marketplace a few years ago, and, besides, GM is launching a redesign of its C/K platform full-size truck line– Chevrolet Silverado/GMC Sierra.
Basically, GM doesn’t see the strike or Toyota’s truck as affecting its position in this market–36 percent and growing.
“Toyota’s a good competitor, but they were a pretty big failure the first time out with a full-size pickup–to invest billions of dollars and come with less than 1 percent of the market is a little tough. We’ll see how they’ll do this time,” said GM’s Rick Baldick, assistant brand manager for the Silverado.
“Yes, I think it’s the last bastion of domestic-manufactured ownership. A lot of people recognize that a full-size pickup is distinctly American, and I think all three manufacturers have done one heck of a job producing excellent trucks. It’s a very competitive business with Ford, GM and Chrysler and Toyota missed the boat the first time.”
Indeed, the Ford F-Series pickups drive this tooth-and-nail market as Joe Koenig, truck public affairs manager for Ford Division, was eager to point out.
“We sold 746,111 F-Series pickups last model year (’97) which makes it the best-selling vehicle for any car or truck in the U.S. for the 16th straight year,” Koenig said. “Not many people realize that a pickup truck is actually the best-selling vehicle overall.”
Just as GM has redesigned its large pickup truck platform, so, too, has Ford with the 1999 F-Series.
Koenig described a host of changes ranging from an improved 5.4-liter V-8 engine that offers 25 more horsepower (260 h.p. up from 235) to a standard fourth door on the Super Cab models.
Ford’s ace-in-the-hole in this market might not be how it compares with the Toyota newcomer, feature for feature and option for option, but rather in manufacturing capacity.
Ford has and will continue to flood the market with enough truck product that it can vary the per-unit price to the customer (through incentives and flexible financing deals) and make a profit much more readily than Toyota can.
“We have much more manufacturing capacity than they do,” Koenig said, pointing to four of Ford’s North American assembly plants–Norfolk, Va.; Oakville, Ontario; Claycomo, Mo.; and Louisville–churning out F-Series trucks along with others in Mexico, Venezuela and Brazil for a total of eight dedicated F-Series truck plants worldwide. Toyota has only its new full-size truck assembly plant in Princeton, Ind.
If there is a role model in this market for Toyota, it is probably the Chrysler Corp., which went from a small percentage of the market just five years ago to a significant portion today. The difference? The restyled Dodge Ram full-size pickup, with the front grille that looks like a Peterbilt.
“The Ram was introduced in October of 1993 as a ’94 issue and we sold about 70,000 to 75,000 in that first model year,” said Mike Rosenau, Chrysler Truck public relations manager.
“Since then, sales have shot up tremendously so that we’ve gone from 7 percent of the large truck market back then to 21 percent today, but the size of this market has exploded as well.
“(Ram) sales peaked at 370,000 in the 1996 model year.”
Basically, Toyota needs its new truck to have a similar marketplace impact, but Chrysler’s Rosenau isn’t necessarily worried about that for the short term, either.
“You never ignore a competitor like Toyota, but the domestic truck market right now is very, very tough just among the Big Three and it would take a lot for someone to cut into that,” Rosenau said.
For that matter, in the ongoing chess game that is automotive marketing, Toyota has to be careful not to lose what ground it has gained in the small pickup market.
“Obviously, we’re watching what Toyota does, but we’re getting tremendous response to our own (’99) truck,” said John Middlebrook, GM vice president and Chevrolet general manager. “They’re just arriving at the dealers now so you can probably start to get some response from dealers as the first ones arrive.
“We had a little glitch (in the new product launch) with the UAW strike, but we’re cranking now in all the plants so we’re not too far behind where we expected to be.
“If you really look at the truck buyers, they’re very, very loyal. They’ve stayed that way with us and with Ford, so I think they’re (Toyota) going to have a hard time prying a lot of business out of us.
“In fact, we’ve really made a terrific gain on them in the small pickups–if you look at numbers lately, us with the Chevy S-10, Ford with the Ranger and Chrysler with the Dakota. Frankly, this is one case where we’ve taken it to the imports.”
While sales of the Toyota Tacoma are up 7 percent, at 87,723 units, as of July, sales of the S-10 have grown 21 percent, to to 149,739, according to GM market research.
Added Baldick: “You never count out a competitor like Toyota, but for a guy with 1 percent talking to a guy with 35 or 36 percent and saying that we’re vulnerable, is a little bit much.”