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Toyota Motor Corporation (NYSE:TM)

Merrill Lynch & Co., Inc.'s 2013 New York Auto Summit

March 27, 2013 2:50 pm ET

Executives

James E. Lentz - Chief Executive Officer, President and Director

Analysts

John Murphy - BofA Merrill Lynch, Research Division

John Murphy - BofA Merrill Lynch, Research Division

Next up, we have Toyota, and I appreciate everybody coming in from the other room. So if everybody can get settled, we'd like to give Toyota their due time.

Toyota is the world's largest automaker. They regained that crown last year. Over the last few years, they've had their fair shares of bumps and bruises along the road. A lot of that really was out of their control. There's obviously some large natural disasters that have been large setbacks. But they're back on track. They have a ton of new product coming out, and we think they're in the midst of really making some big waves again in the industry, not that they've ever gone away. But this set of new product launches they have coming out right now really should be a big deal for them.

Today, we're very happy to have Jim Lentz, who is the first ever North American CEO for Toyota and responsible for Toyota Motor sales, as well as manufacturing. He's also a managing officer for the Toyota parent company over in Japan. He wears a lot of hats, does a lot of stuff here. He's been in the industry forever, and he's a great friend of ours at Merrill Lynch and has been a great partner. So we really do appreciate Jim coming today to present Toyota.

With that, I'll turn it over to Jim.

James E. Lentz

Thank you. Well, from that I learned that I have lots of bruises and I've been here forever. Thank you.

I have a lot to cover today, and I want to make sure that I leave ample time for questions and answers. So let's just jump right into it.

With an overall improving economy and an increased focus on our customers as well as our communities, and 9 new or updated Toyota, Scion and Lexus products, we're very optimistic that 2013 will be a great year for the auto industry, as well as for Toyota. We're also optimistic about 2013 because the U.S. economy is expected to continue to improve. Some of the indicators of that optimism include, today, more people have jobs. In fact, last month, as you well know, the jobless rate dropped to a 4-year low. Consumer confidence is once again rising. It's a bumpy road, but its projection is to continue to move up. Stock markets in manufacturing and construction are all up. And the housing market finally seems to have turned the corner. Now these positive indicators and others are the reason analysts believe that our economy will still continue to grow, albeit at a modest rate.

Last year, we saw the economy grow on average of about 2%. And this year will be probably pretty much the same.

Now the auto industry will also grow. Currently, the consensus among the analysts is for total industry sales to increase by about 500,000 vehicles, up to 15 million, about a 3% increase from last year. Some predictions even show that industry reaching 16 million, again, within the next year or so. At Toyota, we're planning for a 15.3 million industry, and we expect growth, especially among our hybrids, small trucks and retail sales, areas in which we excel, so we're poised for a good year.

Now, there are a number of solid reasons why we expect the auto industry to grow. First, there is pent-up demand, with the average age of the U.S. auto fleet hitting a record high of 11 years old. As well, car loans are at historically low rates, and younger buyers are returning to the market at a higher rate than any other age category, which bodes well for market longevity, as well as for Toyota. Our new, more dynamic product designs are helping us bring in those important younger buyers. In fact, we currently have the youngest buyers in the luxury industry, with our Lexus IS, and the younger buyers in the entire industry, with our Scion tC, both of which will be launching new versions this year, so we expect to continue attracting younger buyers.

Now another reason that we expect industry growth in the U.S. is that the U.S. remains the world's fastest-growing industrialized nation. It is projected to add 100 million people by 2015. Now as a side note, from 2012 to 2017, 93% of the population growth will be from an increase in Asians, Pacific Islanders, African-Americans and Hispanics. The Hispanic population alone will account for more than half of that growth. And this bodes well for Toyota because we have the highest market share of any automaker for the Hispanic, African-American, as well as Asian markets. And all of this is good news for the auto industry, and it's why at Toyota, we're optimistic about 2013.

But it's still cautious optimism because we all know too well anything can upset forecasts: exchange rates, the weakness or strength of global economies, even Mother Nature with all its earthquakes, tsunamis, tornadoes and hurricanes that she can bring.

Now for 2013, we expect combined Toyota, Scion and Lexus sales to increase to over 2.2 million vehicles. Our forecast is fueled by several factors. I've already mentioned our strength in the growing diverse markets. But additionally, our 3 brands have been recognized as leaders in automotive excellence. Earlier this month, Toyota, Scion and Lexus earned 7 segment awards in the J.D. Power Vehicle Dependability Study. That's the most of any automaker. Furthermore, Lexus was the #1 brand, and the Lexus RX was the most trouble-free vehicle in the industry, as well as the most dependable vehicle in the Study's history. Lexus was also named the #1 brand in J.D. Power's Customer Satisfaction Index. We also received great recognition from the highly influential Consumer Reports, which ranked Lexus as the top brand in its 2013 annual report and recommends all Lexus vehicles. The Toyota Prius, Highlander and Scion FR-S were also chosen as top models in each of their segments.

Toyota and Lexus vehicles also dominated Consumer Reports Best New Car Values List. Out of more than 200 vehicles in its annual ranking, our products earned top spots in 6 of 10 vehicle categories.

Now in addition, because we've added content and value to our products, Kelley Blue Book also honored our brands with 18 Best Resale Value awards, the most of any automaker. And earlier this month, Fortune Magazine revealed its list of World's Most Admired Companies, a score card of corporate reputation, and Toyota ranked at the top of the motor vehicle company category.

Now in terms of safety, 19 Toyota, Scion and Lexus models have been named Top Safety Picks by the Insurance Institute for Highway Safety. Again, more than any other manufacturer. And in these days of high gas prices, Toyota is still the most fuel-efficient full-line automaker in the industry.

Things are definitely looking up for our 3 brands. So the question is, why did Toyota recently make several organizational executive changes? Well, the changes announced by Global President Akio Toyoda are a continuation of his global vision that he announced in March of 2011. It's always been Akio's plan to build better cars, improve profitability and to give each of the key regions around the world more autonomy to design, develop, manufacture and sell products tailored to their markets. These changes are a key part of that overall plan, and they're not just regular management shuffle-type changes. These are significantly and a huge turning point for our company.

In the past, critics have complained that Toyota's global efforts were hampered by resisting bringing in outsiders and non-Japanese into the inner circle of decision-making. Well, not anymore. For the first time in our nearly 80-year history, Toyota's appointed 3 outside board members. Now one is Mark Hogan, who has deep knowledge of the auto industry. Toyota has a long history with Mark, going back some 25 years. He was the head of our joint venture plant in Fremont, California. And Akio Toyoda, at the time, was the head of production control at the plant. Mark has global operating experience and was Group Vice President with General Motors, and President of Magna International, a major auto supplier.

Now in addition, Toyota's combining all of its North American operations, including manufacturing and vehicle development, and they've asked me to lead our team in the new position as CEO of Toyota North America. This is the first time a single leader has operation and earnings responsibility for the entire North American region, including Canada, as well as Mexico. So there's a little bit on my plate and probably a lot more time on United Airlines.

There were also other significant management changes, including 4 of our 8 regions are now led by non-Japanese. But we also have some great Japanese leaders with loads of overseas experience coming here to help us in the market in North America. Simon Nagata, previously Toyota Motor Corporation Managing Officer for Global External Affairs, will lead our manufacturing team. And Kazuo Ohara, currently the Executive Vice President at Lexus International, will become the new President and CEO of Toyota Motor Sales, both of them reporting to me.

Now all of these changes show Toyota's leveraging talent on a global scale in choosing its next generation of leaderships, regardless of their nationality. And as a result, I believe Toyota is now thinking and acting like a global company, designed to help us make even faster decisions and better tailor our operations and our products to suit the local needs of our customers on a worldwide basis.

And that's what these changes are really all about. They are about our customers, and they're about our ability to better serve them. But even before the leadership change, our efforts to put our customers first were well under way.

In the last 13 months, we've completed or are in the process of expanding our North American footprint, with over $1.5 billion investment to open up new or expand manufacturing plants, to build the products that our customers want. Right now, Toyota operates 14 plants in North America, which produce 70% of the vehicles that we sell here. Some of the expansions help accommodate the increase in our North American-built exports, which jumped by nearly 45% last year. And while these numbers are still relatively small, we expect that number to increase again this year. Currently, we export U.S.-assembled vehicles to 21 countries around the world. In all, our vehicle production jumped by 41% last year. In fact, our manufacturing plants are nearing capacity. Today, our direct investment in the U.S. is over $19.5 billion and counting.

Even better news is, with this boost in manufacturing plants and shift needs, we added 3,500 new jobs in just the last 13 months. Overall, Toyota directly employs over 31,000 Americans. And according to the Center for Automotive Research, every direct job created by Toyota, our dealers and suppliers creates over 10 spinoff jobs. By that measure, Toyota's actually responsible for over 365,000 American jobs. It's equivalent of the population of St. Louis.

Now in addition, our dealers have made huge commitments to their business and to their communities. In just the past 8 years alone, our dealers have invested over $7 billion to rebuild and upgrade their facilities to improve the overall customer experience. These investments and our dealers' ability to create an industry-leading customer experience has helped our customer loyalty remain high for all 3 of our brands.

So now let's talk about our products. As I mentioned earlier, this year, Toyota, Lexus and Scion will be launching 9 new or updated models. And I want to share just 1 of them with you that made its global debut this morning at the New York Auto Show.

The new 2014 Highlander, take a look. The outside is bolder, more aggressive and it has integrated roof rails on our grades of XLE and above. There are also all-new 18- and 19-inch wheels. Now this new, more stylish interior has a third row seat that can accommodate 3 people. So maximum seating capacity increases from 7 to 8 on this new model. There are also many standard and optional premium convenience features like a power back door with height control, a blind spot monitor, rear parking sensor, an 8-inch touchscreen display with navigation with our award-winning Toyota Entune.

We're planning on moving production of the Highlander hybrid to our Indiana plant as well, so eventually, all Highlanders, gas or hybrid, sold in the U.S. will be manufactured here as well. The gas version arrives in December, followed by the hybrid, February of next year.

Now in addition to the Highlander, tomorrow we'll introduce the new Scion tC with significant styling changes. I will also talk about other fun product news from our great youth brand. Scion is approaching its 1 millionth sale, which will probably happen sometime next year. And it continues to play an important role for us by attracting the next generation of buyers into our overall Toyota family. In fact, last year, 64% of Scion buyers were new to the Toyota family.

With the new Highlander, Scion products and more, we're going to continue building on the momentum that began last year with the launch of the all-new Camry and the Prius family and the launch of the RAV4 just 2 months ago.

This year, for the Camry, we plan to sell over 400,000 vehicles, keeping it the #1 selling car in America for the 12th conservative year. For the Prius family, our sales forecast is 250,000 vehicles. And our new 2013 RAV4 is off to a great start. It recorded its best ever February, and for the first 2 months, we've sold nearly 25,000 vehicles. It's up about 11%, and I can tell you that it's really constrained with overall availability. It's selling so well. So we are well on our way to meeting our goal of 200,000 vehicles.

So if you just think about it, just for the Camry, the Prius family and the RAV4, that's already close to 850,000 sales this year. So we are well on track for another great year.

Now what about beyond this year? Well, we have plenty of products coming that will meet the needs of our customers and help to enrich society. We currently have 11 Toyota and Lexus hybrid vehicles on the market, and sales of our hybrids globally since 1997 has resulted in the savings of 26 million tons of CO2 emissions from entering the atmosphere. Now that's like taking over -- taking 4.8 million passenger vehicles off the roads. And at Toyota, we're taking a portfolio approach to environmentally advanced vehicles and offering a variety of alternative fuel choices, including plug-in hybrids, electric vehicles and in 2015, our first fuel-cell hybrid.

Our goal is to create a variety of vehicles for the future that can run on gas or other fuels and to let consumers decide what works best for them. But at the heart of those choices, we strongly believe that hybrids will remain the core technology. It's because our hybrid system can easily be adapted to other power trains to further conserve energy. For example, hybrid technology is a key component of most hydrogen fuel-cell systems. And hybrids can be teamed with larger batteries to increase the range of plug-in models.

So we're fully committed to hybrid technology, and I think consumers tend to agree with us. In 2012, Toyota and Lexus sold over 1 million hybrids on a global basis for the first time ever, and it was 3 years prior to our projection of reaching that goal. In total, our company has sold nearly 5 million hybrids around the globe, 2 million of those have been sold right here in North America.

And I can tell you that we're just getting started because we plan on launching 20 new or redesigned hybrids globally by the end of 2015. And this is all part of our company's global vision to always build better products that respect the planet and help enrich lives of people all around the world.

Well, by now I hope that you can see why I am so optimistic about the auto industry and about Toyota for 2013 and beyond. Automakers can expect a growing number of opportunities, including population growth. And if many young consumers mature, get jobs and start families, their need for cars will continue to increase. We just need to have the right products and the right services to meet the various needs of consumers all around the world.

And as we add more products with better styling and that are driving dynamics, along with our stronger focus on our customers and our communities, we're confident that Toyota will have another breakout year this year, and our future is, indeed, very bright.

I thank you all very much. Best wishes for 2013.

And now, here's the legal disclaimer that I know you've all been looking forward to. Please take a look.

Question-and-Answer Session

John Murphy - BofA Merrill Lynch, Research Division

Before we kick it off to the audience, I have one sort of short-term question, and I'll ask a long-term question a little bit later. Jim, if I just do the simple math, I think the 2.2 million divided by 15 million that you're looking for in the U.S. is 14.7% on the market share, 14.7% to be...

James E. Lentz

That's about close, yes.

John Murphy - BofA Merrill Lynch, Research Division

To be exact, 14.67%, something like that. That's a little bit up from where you were last year, but not -- I think it's like 20, 30 basis points, in that ballpark, but it's not a huge increase in market share. Yet there's this constant fear that the weaker yen is going to put you in a position where you're going to go to war on incentives and pricing to take market share. Just comment -- I mean, it doesn't seem like, given that you're capacity constrained, that would make a whole lot of sense to me. But there's a lot of people that are very fearful that you might use this yen as a weapon right now. I'm just wondering if you can comment on that.

James E. Lentz

Well, I guess a couple of things. I mean, for starters, I guess you can probably take a look at our history and how we've done. When the yen was at historical highs, we still grew at twice the industry's volume. So the yen doesn't determine how aggressively or non-aggressively we behave in the marketplace. We have a plan that we feel based on age of our fleet, on loyalty, on product cadence. That's how we determine where our numbers are, and that's where the 2.2 million comes from. It's really taking a look at a buildup on a segment-by-segment basis. I'm sure, as many of you already know, when it comes to incentives, we are, if not the lowest in the industry, we are 1 of the 2 or 3 few lowest, and we're a fraction of what the overall industry is. And that's a strategy that will not change because that's how you maintain your overall resale volumes. Sure, you're going to go out and double your incentive spend, but in doing that, you're going to harm your customers and deteriorate your overall values going forward. So we're not going to do anything that's not sustainable. The other point that I would make is, the yen doesn't have that much impact on my operations here in North America, because today, 70% of what I sell, I build here. And the parts content of those vehicles is 75%. Camry, which is our biggest selling vehicle, 90% of the parts content comes from North America. So the yen really doesn't have that much influence on what I do here in North America. And as I mentioned in the presentation, we're investing another $1.5 billion in the U.S., 3,500 more jobs. As we see opportunities for more production expansion, as global demand exceeds global supply on series coming down the road, we'll be raising our hand to build those in North America as well. So the yen really isn't going to impact that.

Unknown Analyst

Steve, you're very successful with your hybrid models, probably the most successful globally. Do you think that the percentage of hybrid sales today is where you want it to be? And going forward, how do you think that percentage number changes?

James E. Lentz

Today, the industry is about 3%, 3.5% hybrids. We are closer to 14% or 15%. And I think when you look at the CAFE regulations going forward, as we move the end of this decade into next decade, having to average 54.5 miles per gallon, we still believe that hybrids are the core strategy to be able to obtain those numbers. And I think it's a strategy that is going to be more accepted by the public than EVs may be today, as an example. Although, I mean, EVs will play a role, but until there's significant change in the technology of batteries, it's not going to be a major role in the marketplace. Hydrogen and fuel cells, I think, will also play a role going into the future. But I think you will see our application of hybrids on more and more vehicles going forward. And I think you'll see the percentage of our business continue to increase. Customers are very happy with hybrids. It's the ability to have plug-ins in extended range. I have been a Prius driver for 5 or 6 year. For the last year, I've been driving a Prius Plug-in. And the Prius -- my normal commute, I get about 50 miles per gallon. The Plug-in, I'm averaging 74 miles per gallon. So at some point, you kind of have to ask why would I even consider switching to another alternative-type vehicle like an electric when I can get 74 miles per gallon, 700-and-some miles of range on a current vehicle. So I think more and more consumers are realizing that, and I think that's why our demand is going to continue to build on hybrid.

John Murphy - BofA Merrill Lynch, Research Division

A quick question. You've been with the firm, I think, almost 30 years it looks like from your bio, which is great, and you have a lot of experience in the industry. The last 5 or 6 that I've been kind of observing that kind of the segment where Corolla and the Camry are in, it's gotten extremely competitive. Hyundai has put out some really great product. How have you guys seen the landscape? How do you think that's going to go forward? Do you think they'll maintain a dominant position in that space?

James E. Lentz

Yes, it's interesting. If you go back 10 years, that segment was really dominated by Toyota and Honda. I think between the 2 of us, we probably had 40% of the market. And that's because some of our competitors really concentrated their efforts on the light-truck side. As fuel prices have changed, more of our competitors are coming back to the passenger car market. And I think that's a good thing. If you look at the midsize segment alone, it's up about 10% this year. It was up, I believe, 20%-plus last year. And so, what's happening is that there are more competitors coming into the segment with great new products. It's creating a lot of competition, but it's growing the segment. I think there were a number of standard midsize customers that typically would be defecting to either premium midsize or to near-luxury or to SUV, but because the product offerings have been so fantastic, they're staying in that segment. So the pie is growing. There's no question that our share of that pie has been shrinking. But we still feel that there is plenty of room for us to do 400,000-plus. We think that will probably still be a leadership position in that segment. But it's also a sustainable position for us to be in. I think the sub-compact market, you'll see a very, very similar situation. Continues to grow, albeit not at the same rate as the standard midsize segment. But there's a concept car that we have here at the auto show we call the Furia Concept. And there are some that are saying it may be the next-generation Corolla. I can't really comment on that. But if it were to be, you can kind of see the type of emotional styling that will be seen in even a price-sensitive segment like sub-compact. And that's going to generate a lot of excitement for consumers. So I think that our ability to grow that segment -- and in that segment, I think we will grow share over time. So I think competition is good. I think it gets consumers excited about the industry. It gets younger buyers excited about the industry and it really helps certain segments grow. And in our case, when passenger car business grows, we really thrive. So we look forward to it.

John Murphy - BofA Merrill Lynch, Research Division

A question right in the back.

Unknown Analyst

Just real quick. I don't know if you have a Lexus logo you can show, but you've been kind of status, let's just say, laid back on volume growth for Lexus over the past couple of years, I think, understandably and without any complaints from the Big 3 I noticed. But do you expect over the next couple of years with product and then specifically with newer -- your new engine families, the more efficient engine families, non-hybrid, but to have a more aggressive across-the-board Lexus growth, is it going to be entry or all the way up to the big cars?

James E. Lentz

It's interesting because Lexus, we went through a period where our product cadence was not real robust. And we were viewed a little bit stodgy in the luxury segment. And I think with the launch of the new GS, the launch of the new ES, those that have seen the new IS and the whole new face of Lexus, I think that, that's changing. So I think we will see some incremental growth in what I would call the traditional luxury segments. I think what's going to be interesting is what happens to the luxury business going forward because when we look at these new CAFE regulations coming forward, it's measured on a corporation basis. So Lexus has the advantage of having big brother Toyota to help spread that CAFE requirement. As a result, it's not going to force Lexus to move down market into smaller, front-wheel-drive, traditional, non-luxury segments. I think some of our competitors are going to have no choice but to do that to be able to hit their CAFE targets. So 5 years from now, 10 years from now, when you look at our overall penetration of the luxury market, are we going to be able to sustain or maintain a #1 position going forward when the luxury market is watered down by some of these traditional non-luxury products? Probably not. But we will still be a mainstay player in that traditional luxury business, which I define kind of as vehicles $30,000 to $35,000 and above. We don't have an intention of playing in that under $30,000 market, which some of the luxury competitors are moving into. And personally, I think that's going to be a difficult time for them. It's going to be difficult to manage that luxury experience at the dealership when you have somebody buying a $24,000 car and somebody buying a $124,000 car.

Unknown Analyst

This question is at the other end of the spectrum, the #2 Japanese manufacturer and their French counterpart is moving into -- is creating a whole new market with cars that are [indiscernible] or they're competing with them for the same size. Is this a market that Toyota is looking at, or are they going to leave it [indiscernible]?

James E. Lentz

We're always looking at each and every market. There are -- there is one market that we're not a major player in today, and that's the entry sub-compact market. Nissan Versa really dominates that market. And it's a market that will see some growth. We will be importing vehicles actually from France, the Yaris, and probably increase our volumes a little bit. But That's a marketplace that we are not as excited to invest a lot of resource in when there are other segments that, quite frankly, I think give us a better return. We have a partnership with Mazda that we're going to enter, where they're going to build a Mazda 2 product that we will sell under our nameplate, our specifications starting in 2015. But the other market I think that I find most intriguing is the small SUV segment. Honda has a vehicle on display, a concept, that they will bring out to the marketplace. Because if you look at the small SUV segment, over time, those vehicles have grown quite large in size. One could argue that vehicles like RAV4 are probably as large, if not larger, than what mid-SUVs were probably 1 or 2 generations ago. So I think we will see that small SUV segment start to divide into smaller, more entry small SUVs and then more traditional SUVs that we see today. So we're obviously studying that. It's all about timing to understand when that's going to take place to make sure that there's a market there before you bring a lot of product in against that. But especially with Gen Y, I think that's, personal opinion, going to be an important segment and if it is, it's something that we're definitely going to play in. And I think you'll see other manufacturers do the same thing.

Unknown Analyst

You mentioned a fuel-cell car coming out in 2015. I was just wondering, are you going to have this kind of like a new nameplate, like the Prius? And then, kind of taken from a price point perspective, is this going to be like a Camry, RAV4, Highlander option, or is this maybe at the start going to start out just kind of on the Lexus line?

James E. Lentz

We haven't decided on nameplate yet. And because we haven't decided nameplate, we haven't decided exactly which brand it will be in. If I were a gambling man, I would say that initially, it probably will come in through the Toyota nameplate. And then at some point in time, Lexus will probably have an alternative of that vehicle. But it's a little bit too early to tell. We're still working on styling of the vehicle. We've had a number of fuel cells testing for the last few years, primarily in a Highlander body. But this fuel-cell will definitely be in a passenger car body. And it will be sometime in 2015. But exactly what we're going to name it, I don't think it will be under the Prius name. I don't know if it will be within an existing series or if we're going to have to come up with a new name. My guess is, it will probably be a new name. But probably not Lexus initially.

Unknown Analyst

The Prius is now 15, 16 years old, something like that from the original Priuses. At the time, there was questions as to how long those batteries would last and whether that would impact resale. Customers were looking at 5,000, 6,000, 7,000, whatever was being rumored, as far as the battery refit at the time. Now that we're 15, 16 years in, technologies developed, sort of what's the history of the battery life, what can customers expect? If you were to buy a Prius today, how would the battery life look as maybe compared to how it looked when it was first introduced?

James E. Lentz

When it was first introduced, we were probably a little conservative on the life. Today, the batteries are warranteed for 10 years, 150,000 miles. We are seeing some replacements of some of what they call Prius classics, the very first Priuses sold. But we also get letters from customers with 300,000-plus miles on vehicles with no issues in batteries, and you can look around New York and see how many Prius taxis are around here. A lot of those cars are running 24/7 and have hundreds of thousands of miles on them without failures. So we're really not seeing a very high failure rate at all. I don't even want to guess at the percentage, but it's very, very small. And I think the replacement on batteries is around $2,200 to $2,500. So initially, you're right. Back in 2002, I think replacement battery packs were around $6,000 to $7,000, but that's not the case today.

Unknown Analyst

If I'm not mistaken, your margins have somewhat lagged the industry over the past several years. What would you attribute that to? Is that just the volume hiccups related to disasters, natural stuff, or is there something else that's behind that?

James E. Lentz

Well, I think it's a number of things. I think obviously, the natural disasters had a big piece to do on that. I think if you look at on a global basis, even though only 1/3 of our volume comes from vehicles manufactured in Japan, on a global basis, the yen has been a challenge in relation to either the dollar or the euro. So I think that's had some impact as well. And there's no question that as we went through the recall crisis, globally, we took a big hit in sales volume. So between financial crisis, recalls, tsunami, the last 4 years, from an operating standpoint, have been a big, big challenge for us. But all of those, we've turned the page. That's behind us now. And I think you'll see recovery in margins as well. Plus, we're also going to be reaching capacity in a number of our manufacturing facilities. We continue to price up based on what our competitors are doing. And we continue to have the lowest incentives. So all of that, I think, will support the bottom line.

John Murphy - BofA Merrill Lynch, Research Division

With that great news, I think we should probably wrap up. Thank you so much, Jim, for joining us. We really appreciate your time.

James E. Lentz

Thank you. Appreciate it. Have a great day.

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