Toyota Woes Drag Detroit Back Into Incentive Wars

by Edward Niedermeyer

Published: March 16th, 2010

toyota woes drag detroit back into incentive wars

The biggest storyline right now for America’s bailed-out automakers is how little they’ve been able to capitalize on Toyota’s stumbles. While Ford and Hyundai made hefty sales gains last month, both GM and Chrysler’s performances were distinctly unimproved by Toyota’s woes. And now that Toyota is launching major incentive packages to recover lost sales momentum, Detroit has no remaining incentive to not revert to the bad old practices of incentive dependence. With GM and Ford diving into the zero-percent war, Global Insight’s George Magliano tells Automotive News [sub]:

Incentives are going to be here into the third quarter. We’re not going to wean consumers off incentives any time soon. We’re stuck with it. They’re all jockeying for position… After clunkers everybody backed off incentives. Now they’re going to the whip again

The problem is that Toyota has the cash to spend on rebuilding its sales, whereas Ford and Chrysler don’t so much. GM is sitting on over $40b in cash, but faces enough expensive structural issues around the globe that it can’t afford to give away taxpayer cash with too free a hand. Edmunds.com’s Jeremy Anwyl reckons:Broad incentives are hard to sustain because they are so expensive. Zero-percent is war, a product-line deal is a skirmish. Automakers are always conflicted about profits and market share, but they are opportunistic, so there will be a lot of skirmishes this year.Sure enough, Toyota plans on keeping its foot pinned to the incentive accelerator. Automotive News [sub] reports that Toyota’s sales have taken off in the first week or so of March, as massive incentives bring buyers back to showrooms. And the irony-drenched truth is that GM and Chrysler had the highest incentive levels before Toyota started fighting back, which means competing requires not just introducing incentives, but actually extending them. Don Esmond, senior vice president of Toyota Motor Sales crows to AN [sub]:For us, it’s a pretty big step up, but still if you look at what the competitors spend per vehicle basis, we are still 30 percent below our competitors,Oh snap. For a year that was supposed to witness the dawning of a new day of profitability and prosperity in Detroit, this isn’t shaping out well. Maybe pushing Toyota into a corner wasn’t such a smart idea.

#Chrysler #Ford #GM #Incentives #Marketing #Sales #Toyota

Edward Niedermeyer

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Crash sled on Mar 16, 2010

I don't foresee Toyota dropping their prices much, as that doesn't seem to be their model. They're presumably cutting overhead, by closing NUMMI, and calling for various plant idlings as necessary. And Hyundai and Kia were on the lower end of the incentives scale as I recall. The Detroit 3 is on their own here, as usual. They're the ones with the overcapacity and inflexible overhead, so a price war hurts them the most. And Government Motors has shot their wad on the Toyota hysteria, so they can't really play that card again on the other transplants. The market will decide, and I can't foresee the market supporting any Government Motors IPOs in the near term.

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Shaker on Mar 17, 2010

GM's few vehicles that could take Toyota sales (Equinox/Terrain; Malibu, LaCrosse) are in short supply; they weren't positioned to take advantage. Ford is pushing aging platforms (yes, even the Fusion) that EcoBoost can't save. Chrysler -- meh. Toyota will win, again. But maybe they just played to the level of competition - with only Hyundai raising the bar.

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