Glenn Mercer

Toyota Offloads Financial Arm

Sethmcs: I believe they are NOT selling their captive finance arm, but that the captive finance arm of Toyota is selling its securities brokerage unit. So the captive will still be intact to make car loans and leases... they are just getting out of the securities brokerage business.

Overcapacity: The Auto Industry's Big Little Problem

I agree entirely but, after being in this industry for about 25 years and seeing this issue persist throughout, I don't see much hope ahead. Overcapacity persists for individually-rational but collectively-irrational reasons. For example, if I close my plant and thus reduce supply, I pay all the costs of closure, while my rivals benefit from any price rise generated by reduced supply. For example, governments are all too willing to fund plant investment (every politician wants to stand in front of a new factory that employs 5,000 people!), so cost of new capacity is very, very low. Then there is pricing: in the auto industry marginal price becomes average price quickly (that is, I don't mind paying $200 more for a Gucci bag at Nordstrom's even though I know it is less at Dollar Tree (okay, bad choice of stores!)) but if I am buying a $35,000 car I make darn sure I am getting a good price. Thus if demand is for 99 units at $100 ($9,900), discounting the 100th one to $90 cuts overall revenue to $9,000, for a true loss of $900, not $10. Conversely (to continue this boring lecture) if demand turns out to be 100 instead of 99 the bonus from having the extra unit of capacity is $900. Thus there is always this incentive to overbuild and go for the extra unit. Another way of viewing this is pull versus push of course. Anyway, I don't think excess capacity will ever go away...

Rewarding the Ecologically Irresponsible with Taxpayer Dollars

Remember that the bill, at least as I understand it, requires the person who trades in the clunker to show paperwork (e.g. a registration) proving that a) he or she has owned the vehicle for at least one year (thus in theory blocking people buying clunkers just to cash them in) and b) that the vehicle was road-worthy (thus in theory blocking the dragging in of rust buckets that were up on blocks for the last ten years, which would erase the environmental benefits). I don't know if enforcement of all this will work, but at least these issues seem to have been addressed.

On the Need for Better Auto Sales Metrics

I cannot say how much I agree with this post. Does Wal-Mart report unit sales of socks each quarter? Does Armani seem doomed because it sells only 1% as many suits as Value City? The auto industry, with its fascination with units, lumps a Maserati with a Mazda and a Maruti as all the same thing. Thus we get frenzied pursuit of developing markets, which represent "all the growth." In units, yes, but GM itself has forecast that ten years from now in REVENUE terms the developed world's share of total automotive sales will have hardly budged at all, even as its UNIT share falls. I'd rather be selling 50 Porsche Turbo's a year than 50,000 Tata Nano's...

Will Hyundai's Luxury Car Be Like the VW Phaeton?

I think the big difference here is the lack of a new dealership channel. It is hard to sell a $70,000 VW, a $50,000 Toyota, a $40,000 Hyundai, etc. in general: but to sell them in the existing dealerships is very very tough. When one is selling an upscale vehicle it is crucial to reassure the buyer that he/she is making a very smart decision, that he/she is now one of the elite club, etc. Thus a BMW dealer's muted lighting, soft music, pile carpets, and espresso machines. How does one sell a $45,000 Genesis in a dealership characterized by (sorry for the exaggeration here) linoleum floors, soda vending machines, and nervous buyers waiting outside the F&I office to see if they qualified for the loan? Surveys have shown that as one spends more on a car the dealership matters more and more, relative to the car, and for Hyundai to not launch Genesis in a separate store, or VW not to launch Phaeton in a separate store (versus what Lexus did), really means one starts with two strikes against you....

Is There Any Hope for the Big Three Auto Makers?

Beats me how my one comment got printed several times! Sorry about that, it was not THAT profound a statement!

Is There Any Hope for the Big Three Auto Makers?

Much as I hate to say this, it may be time to redefine what we mean by the Big Three. Maybe the Big Six?

Is There Any Hope for the Big Three Auto Makers?

Much as I hate to say this, it may be time to redefine what we mean by the Big Three. Maybe the Big Six?

Is There Any Hope for the Big Three Auto Makers?

Much as I hate to say this, it may be time to redefine what we mean by the Big Three. Maybe the Big Six?

Is There Any Hope for the Big Three Auto Makers?

Much as I hate to say this, it may be time to redefine what we mean by the Big Three. Maybe the Big Six?

Is Anything Worth Owning in the Auto Industry?

A few comments:
1. Re Prius's looks, I was unaware anyone was buying the car for its styling. Leaving aside opinions about looks, the car has the fastest inventory turns in the USA at present, staying on dealer lots just long enough to be washed, prepped, and delivered. About one day. Love the Prius or hate it, it is a sales homerun for Toyota.
2. Conversely, while I think the Honda product line has a lock on success for the foreseeable future (after all, knocking off the F-150's sales crown is stunning!), Acura is arguably in some disarray. Only one of the Japanese upmarket brands has broken into the "Tier One" luxury segment, and that is Lexus (with a vengeance of course!). Acura continues to languish somewhat and arguably has been passed by Audi.
3. A key asset every Japanese company has, that is often overlooked, is the reservoir of high-mpg models they have "back home" that can be brought to the USA quickly if fuel prices stay high. Thus Toyota did not need to develop Scion from scratch, but just adapt domestic models for USA sales. Nissan brings its Cube here next year. Etc. Chrysler has no such reservoir; Ford could tap Mazda for small cars but to date seems not willing to do so; and GM has Daewoo in Korea, which should be able to deliver the goods (though the Aveo has been a real dud, I will admit). Unfortunately for the Big Three, the flow does not reverse: there is really no market anywhere in the world desperate for large pickup trucks.

Will Toyota Lose Its Edge?

Labor cost is of course important, but I would assert that you are looking at this through Detroit's lens, which is that "all problems are cost problems." If a Toyota has higher resale value than a Ford, then a Camry buyer will pay more for it upfront than for a Ford, as he or she gets the value back upon resale. The higher price allows Toyota to earn better profits or even pay its workers more. That is a simplistic point, but for decades Detroit ignored it. Look at the Sebring, with its cheap interior. Cheaping out the interior implies a belief that "Someone really wants a Sebring, so if we can cut $400 out of it, we'll sell more." The problem is, there is no huge untapped demand out there for a Sebring that costs $400 less. There MAY be untapped demand out there for a Sebring that is a nicer car. Thus Detroit may save $500 in labor costs on a car, but have to give up $2,000 in price cuts to sell it. Detroit has finally gotten the message and is now focusing on trying to raise value and thus price, not just keep squeezing costs. Toyota certainly has to watch its labor costs, but they will always do better to worry about price as long as Detroit is still fixated on costs.