With Workable Stimulus, Toyota Forecasts Better Second Half
January 16, 2009
By Bill Visnic
DETROIT - Saying at the Detroit auto show here that the U.S. auto market is entering a period of transition that is almost certain to be difficult for both automakers and consumers, a senior Toyota U.S. executive is forecasting a rebound in the second half of 2009.
Acknowledging drastically reduced vehicle sales in the second half of last year reached levels as painful for Toyota as most other automakers, Bob Daly, Senior Vice President, Toyota Motor Sales USA, says a number of factors make Toyota confident a "recovery" is coming in the second half.
Daly also says Toyota believes there is pent-up demand. And available and loosening credit. But a palpable lack of consumer confidence (the industry's current ball-and-chain, according to most auto executives speaking at the auto show here) means a lot of the awaited recovery will hinge on some type of government stimulus that helps energize the nation's hunkered-down consumers.
"Right now, I think you have a lot of people who are on the sidelines," said Daly. "I think you have a lot of people who want to buy. (Private) customers and business people are just out of the market right now.
"The truth is, there's money in the showroom - you can get a loan if you want one," he said. But consumers not only perceive credit to still be tight, they remain cautious about the future of the broader economy.
He says gradually easing credit and a hoped-for federal stimulus directed at individuals might help improve confidence levels. But it will have to be the right kind of action.
"We think the way to stimulate the economy is to stimulate the ability of the average person to buy things," Daly told AutoObserver in an interview.
Daly said another factor affecting a potential recovery is product itself: during this unprecedented economic upheaval, there's also been a serious transition in the direction of the product itself, veering quickly towards products that display a sense of environmental consciousness. Consumer preference is along for the ride, too.
"We're entering a period of transition," Daly said, one in which "the customer is understanding the need," for sustainability. "In the long term, it's going to be a fairly significant transition," he added, saying the industry will see "the garage evolve."
But although "the customer is moving," Daly said buyers are getting conflicting signals - particularly at the gas station - about what they should be buying or thinking about buying. Insinuating that wildly fluctuating fuel prices have heightened the market's chaotic state, "Customers and the industry would benefit from certainty," in fuel-price trends, Daly said.
Toyota believes the market will begin to correct in the second half, as the nation's economy stabilizes and consumers hopefully begin to regain confidence. But he admits at least the first quarter of the year will be a write-off.
"We look at the first quarter almost like a fifth quarter from last year," he said. To keep on an even keel, he said Toyota will stick to a game plan that bridges from the awful sales pace of the second half of 2008 and the beginning of this year to the projected recovery in the second half.
That plan includes: keeping a tight control on production (Toyota has cut back significantly in almost all world regions); maintaining inventory and remaining flexible. That includes continuing incentives, if need be - although the company currently is evaluating the effect of its long period of no-interest financing for most of its models.
"What you're seeing right now from us is a lot more emphasis on cash," Daly said, adding that although Toyota's tradition has been to "stay away" from an overreliance on incentives, the company realizes incentives are vital right now as a "bridge" for cautious customers to make a purchase.
Daly says Toyota won't yet venture an official U.S. sales forecast for this year, but "we've been talking about somewhere in the 11-12 million range," that would be achieved with the significantly better second half the company is confident will come.
Photos by Toyota
1 - Toyota held the world debut of the 2010 Toyota Prius at the Detroit auto show this week. Bob Carter, Toyota Motor Sales group vice president and general manager, did the honors of unveiling the car.
2 - Bob Daly
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