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Old 08-05-2012, 09:19 PM   #1
AR2
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Default Toyota Outearns Detroit Car Companies Combined!

I just saw this article and I had to post it. The headline alone made my jaw drop.

http://www.forbes.com/sites/michelin...kers-combined/

There are a few things that I noticed while reading this article.

1) As usual, Detroit started celebrating too soon when Toyota fell on hard times last year (i.e. the tsunami, quality problems, etc...). It appears Toyota is back and stronger than ever. This can't make the Detroit CEOs too happy.

2) Toyota is making big earnings now - and it has just started re-inventing its lineup. The new Camry just debuted and the new, sexier Avalon is right around the corner. Then there are the new hybrids and a new Corrolla coming out next year that is supposed to be a radical departure from the current, boring model. On top of this, Lexus is reloading with new, sportier models. As long as quality stays at the top, I can't see any reason for customers to walk away from this company. This latest quarterly earning may just be the tip of the iceberg.

3) Chrysler earned $436 Million (not Billion as the article stated). While that is better than losing money, it really isn't that much of a profit. GM made 3 times that amount in the 2nd quarter and it is not even half of what Ford made. With sales up 20, 30, sometimes 40%, and market share growing, one would think Chrysler would be earning a heck of a lot more. So, what is cutting into Chrysler's earnings? I wouldn't think Europe would be a negative since Chrysler is all but out of the European market. I have to wonder if the high incentives and high fleet sales that are contributing to increased sales is cutting into profits. What will happen when auto sales slow again straining profitability?
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Old 08-06-2012, 01:42 PM   #2
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Thanks for the post - that was interesting.

To add to your point about Toyota's resurgence, I've been very impressed with the new cars from Scion. I was of the opinion that Scion was a dieing brand but now I think it has a real chance to attract new (younger) buyers to the Toyota family. As I stated in another thread, I think Scion re-badging a version of the Subaru BRZ was brilliant.

Concerning Chrysler's profitability, frankly I haven't taken the time to study it very carefully. While I suspect that high incentive costs are part of the problem I think Auburn Hills is doing the right thing by putting money on the hood and chasing volume.

A lot of good NEWCO dealers died when Marchionne implemented is "hibernation" plan and I'm happy to see big incentives if that's what it takes to sell vehicles like the Chrysler 200.

Concerning the Chrysler 200, my parents live in a retirement community and I can't believe how many Chrysler 200s I've noticed lately. For as bad a car as the Chrysler Sebring was I have to tip my hat to Auburn Hills for finding the right mix of styling, pricing and incentives that have allowed the Chrysler 200 to become a volume piece for many dealers.
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Old 08-07-2012, 07:02 PM   #3
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Thanks for the post - that was interesting.

To add to your point about Toyota's resurgence, I've been very impressed with the new cars from Scion. I was of the opinion that Scion was a dieing brand but now I think it has a real chance to attract new (younger) buyers to the Toyota family. As I stated in another thread, I think Scion re-badging a version of the Subaru BRZ was brilliant.
Surprisingly, Scion seems to have a bit of life left. I don't know how long the brand will last, but it seems Toyota is not giving up without a fight. I guess we'll have to see what the future holds for Scion.

Toyota's resurgence is bittersweet for me. On one hand, it goes against everything that I was taught. That is, the foreign car companies are taking over the American auto market. On the other hand, what can you say about Toyota's efforts to dig itself out of the big hole it built a few years back? It is nothing short of amazing. This is the kind of effort I always wanted to see come out of the Detroit automakers.
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Old 08-07-2012, 07:23 PM   #4
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Originally Posted by XDCX View Post
Concerning Chrysler's profitability, frankly I haven't taken the time to study it very carefully. While I suspect that high incentive costs are part of the problem I think Auburn Hills is doing the right thing by putting money on the hood and chasing volume.

A lot of good NEWCO dealers died when Marchionne implemented is "hibernation" plan and I'm happy to see big incentives if that's what it takes to sell vehicles like the Chrysler 200.

Concerning the Chrysler 200, my parents live in a retirement community and I can't believe how many Chrysler 200s I've noticed lately. For as bad a car as the Chrysler Sebring was I have to tip my hat to Auburn Hills for finding the right mix of styling, pricing and incentives that have allowed the Chrysler 200 to become a volume piece for many dealers.
I'm not as big a fan of incentives because I think they can be depended upon as a crutch to cover up poor performance. They are like a drug. Having said that, incentives are necessary to compete in the industry. The difference is that some auto companies try to compete with as little incentives as possible. This helps the company, but hurts the dealers that want to sell volume. I don't know, I think it is a fine line from having too much in incentives and having just enough. Fiat-Chrysler, in my opinion, depends way too much on incentives to move the metal. It is like the company has to pay consumers to take the products.

Regarding the 200, I have mixed feelings about the car. On one hand, it is a pretty nice looking sedan. The designers got it right (compared to the Avenger). I also see a lot of them around here as well.

However, here is where I have a problem. After checking the latest sales numbers, it appears the 200 (and Avenger) are near the bottom of the midsize sedan segment. The only cars that the 200 outsells are the VW Passat, Dodge Avenger, Mitsubishi Galant, Subaru Legacy, Mazda 6, and Suzuki Kizashi. Outside of the rapidly growing Passat, these cars aren't exactly heavyweights in the class. The 200 is looking up at the Kia Optima, which is starting to leave it in the dust! Even with $3,000 incentives and fleet sales, the 200 is being passed by (formerly) lesser brands. The consumers are voting with their wallets, and other than certain areas, they aren't rushing to the 200. In my opinion, I find that to be rather revealing. Don't get me wrong, I think the 200 is a nice looking car, but apparently its brand image (and Chrysler's) isn't very high on the midsize sedan buyers' list.
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Old 08-08-2012, 11:49 AM   #5
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Originally Posted by AR2 View Post
Toyota's resurgence is bittersweet for me. On one hand, it goes against everything that I was taught. That is, the foreign car companies are taking over the American auto market. On the other hand, what can you say about Toyota's efforts to dig itself out of the big hole it built a few years back? It is nothing short of amazing. This is the kind of effort I always wanted to see come out of the Detroit automakers.
BINGO - we are on exactly the same page.

There's part of me that's sad to see American companies losing out to foreign competitors on our own soil. That said, I have phenomenal respect for Toyota and the other Japanese OEMs for their ability to recover from the horrific damage caused by the earthquake.

What's even sadder is the realization that Japan as a country has done a better job getting their infrastructure back operational following the earthquake than the U.S. government would have done if it faced a similar disaster. To be clear, Japan's response wasn't perfect and it does appear that top officials lied about the levels of radiation that were released but on the whole I think it's amazing how Japan has recovered from the devastation.
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Old 08-08-2012, 12:03 PM   #6
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Quote:
Originally Posted by AR2 View Post
I'm not as big a fan of incentives because I think they can be depended upon as a crutch to cover up poor performance. They are like a drug. Having said that, incentives are necessary to compete in the industry. The difference is that some auto companies try to compete with as little incentives as possible. This helps the company, but hurts the dealers that want to sell volume. I don't know, I think it is a fine line from having too much in incentives and having just enough. Fiat-Chrysler, in my opinion, depends way too much on incentives to move the metal. It is like the company has to pay consumers to take the products.
On this issue, were mostly on a different page....

I love incentives if they're used correctly and in my opinion Chrysler was the best in the business in this area back in the mid to late 90s.

In my opinion OEMs should use incentives to manage the product life cycle of a vehicle and they should always have an offering in their stable that can be sold in volume with deep incentives. When a vehicle is hot, like the Jeep Grand Cherokee, an OEM shouldn't need to use any incentives and they should maximize profits and attempt to increase market share with advertising and promotions.

With a vehicle that's stone cold, like the Chrysler Sebring, the OEM should add equipment and create new packages that allow for big discounts. In my experience new cars with big incentives allow dealers to sell vehicles to people who are buried in their trades.

When Chrysler was at the top of their game they had a great reputation for taking care of their dealers who loaded up on vehicles that were going out of production. I still remember a dealer in Southern California who loaded up with '98 Grand Cherokees as the vehicle was going through its final build-out and he hit a Home Run when Chrysler put heavy incentives on the old Jeep as they launched the new '99 Grand Cherokee.
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