Toyota's Plan B: Incentives Aplenty. Here We Go…
The news is flying thick and fast out of Detroit this week, as the annual conclave at the don’t call it The Detroit Auto show puts hundreds of journalists in close proximity to corporate newsmakers and spinmeisters. Automotive News [AN, sub] is doing the do. First up: Toyota’s admission that its “Saved by Zero” didn’t save the automaker from a humiliating December; trucks sank by 50 percent and they lost critical U.S. market share. So ToMoCo’s reaching deeper into its deep pockets.”The shift that you’ll see in January from December is more consumer cash and less APR and lease support through our dealers,” Toyota USA Prez Jim Lentz told AN. Jimbo didn’t offer any specifics, but AN rightly points out that Priora are stacked up like cordwood. “One of the largest sellers of Priuses in the country, Earl Stewart Toyota in North Palm Beach now has about 70 on the lot that it can’t get rid of. ‘Any kind of Prius anybody wants — any color, any anything — I’ve got it,’ Stewart says. ‘And if I don’t have it I can get it because there are several hundred in the port. Dealers don’t want them.'” Note: “According to Edmunds.com, Toyota had the biggest percentage boost in incentive spending in December at an average $1,995 per sale. That was up 87 percent from what the brand spent in December 2007.” The implications of all this are pretty clear…
Uncle Sugar can throw as much of your money as he wants at The Big 2.8, but Toyota’s experience shows that the idea that the feds can manipulate the law of supply and demand through cheap credit has been shot down. Nor can they change the fact that everything sells– at a price.
Toyota has an enormous war chest. They can afford to sell cars at a loss. Chrysler and GM have no money (except yours). They can’t afford a price war with Toyota, and neither can mortgaged up to its eyeballs Ford. Political concerns and commercial realities meant that Toyota has never really played the “cheap as chips card.” When they do, there will be blood everywhere.
More by Robert Farago
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Different people have different theories. But I don't think the "lost decade" in Japan was due to deflation. Japan had serious asset bubbles in both stocks and property. The Nikkei average peaked at 36,000. Housing and commercial properties peaked at up to four times their worth. These bubbles had to burst. But politically, the Japanese did not want to suffer. The message I take from Japan is that you cannot keep companies, banks or people on life support if they are bankrupt. Let the market work. Then emerge from the ashes. That's my take at least.
@ tesla I think it's believed the Japanese prolonged their "lost decade" by not directly dealing with deflation. I'm not sure what the other tools are; they tried to expand credit too. The Japanese parallels to the current US situation are not encouraging. Weird how all these things are prescient. Someone was awake at FDIC, sometime in the recent past..... I'm no expert, but manufacturer driven deflation is not a good strategy for a recession economy. The message I take from Japan is that you cannot keep companies, banks or people on life support if they are bankrupt. Let the market work. Then emerge from the ashes. Most definitely.