Winnipeg Free Press - PRINT EDITION

Toyota is built for America

After recalls, fines and tsunami, it's now the U.S. top-seller

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Toyota Motor Corp. appears poised to regain its position as the world's largest automaker, a remarkable turnaround after years of safety recalls, huge federal fines and the Japanese earthquake last year.

In short order, surging sales have put that all in the rear-view mirror.

Toyota is likely to sell 9.7 million vehicles this year, surpassing second-place General Motors Co. by more than one million vehicles and setting a record for annual auto sales. That's generating huge profits, with earnings tripling in the latest quarter to $3.2 billion and sales surging almost 20 per cent compared with a year earlier.

The U.S., where Toyota's reputation suffered most through the recalls, is now a cash cow. Through the first 10 months of the year, the Japanese automaker sold more than 1.7 million cars and trucks in the country, a 30 per cent gain and more than double the industry growth rate.

"Toyota has done some smart things," said Rebecca Lindland, an analyst with IHS Automotive. "They have concentrated a lot of time and effort on the U.S., which is incredibly important because they make so much money here."

The Japanese automaker has launched 11 new or completely redesigned models in the U.S. in the last year, including new station wagon and commuter versions of its popular Prius hybrids. Last week, at the Los Angeles Auto Show, it launched a new-generation RAV4 sport utility vehicle. The current model is an aging vehicle facing stiff competition from newly redesigned offerings such as Ford Motor Co.'s Escape and Honda Motor Co.'s CR-V.

Toyota has ramped up its factories in the U.S., opening a Corolla plant in Mississippi and expanding pickup truck manufacturing in Texas. And at the urging of chief executive and founding-family member Akio Toyoda, the automaker is looking to inject some panache into its historically bland styling, especially for its Lexus luxury division.

Toyota now accounts for 14.4 per cent of the U.S. auto market, up from 12.6 per cent during the first 10 months of 2011. In retail -- not including rental and fleet sales -- the Toyota brand is the biggest in the U.S., outselling GM's Chevrolet.

The company is expanding its factory network in the U.S. as part of a strategy to manufacture in regional markets and blunt the profit-eating consequences of the Japanese yen's strong exchange rate with the dollar. It has put $1.4 billion into U.S. factories and equipment in the last year, adding more than 2,700 jobs on top of the 1,300 positions created in the U.S. the previous year.

The expansion comes after Toyota's controversial decision to close the New United Motor Manufacturing Inc. plant in Fremont, Calif., displacing nearly 5,000 workers in early 2010. Toyota shut the plant after GM, as part of its bankruptcy reorganization, pulled out of joint manufacturing there.

Toyota also is shipping more U.S.-built vehicles abroad. In the first 10 months of this year, it exported 74,000 U.S.-built cars to Canada and Mexico and 29,000 to overseas markets. It is sending Kentucky-built Camrys to South Korea and Indiana-built Sequoias to Saudi Arabia. Exports of U.S.-built Toyotas are on track to rise more than 50 per cent this year.

Just three years ago, Toyota was the second-largest auto seller in America, with 17 per cent of the market, and was closing in on a crippled GM, which was struggling with the stigma of bankruptcy and a federal bailout. But Toyota was derailed in a series of embarrassing recalls.

In one high-profile accident, an improperly positioned floor mat in a sedan from Toyota's Lexus luxury division may have trapped the accelerator, causing the car to race down California Highway 125 near San Diego at more than 160 km/h. The car crashed and burned, killing off-duty California Highway Patrol Officer Mark Saylor and three members of his family.

That crash led to a safety investigation and recall of 3.8 million Toyota and Lexus vehicles to fix the floor-mat problem. After a Los Angeles Times series on unintended sudden acceleration, Toyota issued millions more recall notices to fix sticking gas pedals and other issues.

Then, two years ago, Toyota paid record federal fines of nearly $50 million for failing to promptly inform regulators of defects and for delaying recalls. At one point, it had to halt much of its production of new cars in the U.S. to fix recalled vehicles.

Just as the automaker started to recover, it was hobbled by last year's earthquake and tsunami in Japan, which upended Toyota's manufacturing, even on American soil. Toyota's share of U.S. auto sales slid to 12.9 per cent, well below GM's and Ford's.

Several factors have helped Toyota survive the recalls and disaster-related production shutdowns, said James E. Lentz, CEO of Toyota Motor Sales, the automaker's U.S. marketing arm.

First, there was "the loyalty of our consumers as we went from the financial crisis to the recalls to the tsunami," he said. "They stayed with us for the entire time."

Lentz said Toyota also benefited from a leap in the number of redesigned and new models for the U.S. market. The new models included the Prius V station wagon, the Prius C mini-car, a new Avalon full-size sedan, an electric version of the RAV-4, the gas-powered RAV-4 just revealed, and the Scion FR-S sports car, which has received top reviews by the automotive press.

This year, the automaker will introduce 19 new or updated models it expects will account for about 40 per cent of its sales. Last year, new or refreshed models made up just seven per cent of Toyota's U.S. sales volume, Lentz said.

"This was more than just changing sheet metal," he said. "There is a lot of improvement to interior and exterior styling, drivability and technology."

Despite the progress, Toyota still struggles with large recalls. In November, it recalled almost 700,000 Prius hybrids to fix a steering-shaft problem. About 350,000 of those hybrids must also have their electric water pumps replaced. An additional two million vehicles were recalled worldwide to fix the same problems.

In October, the automaker recalled 2.5 million vehicles nationally to fix a faulty power-window switch that has been linked to at least nine injuries and several hundred reports of smoke and fire.

But by one important measure, Toyota has rebuilt its reputation for reliability, which the company earned over decades.

When Consumer Reports issued its annual predicted reliability report in November, Toyota's three brands -- Scion, Toyota and Lexus -- swept the top spots. Moreover, 16 of the Toyota brand's 27 models earned the magazine's highest rating, and the Prius C earned the top reliability score overall.

-- Los Angeles Times

Republished from the Winnipeg Free Press print edition December 14, 2012 F4

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