Loyal dealers not feeling the love for Toyota

[NINETY EIGHT REGENCY]

Loyal dealers not feeling the love for Toyota

Kathy Jackson

Automotive News -- February 15, 2010 - 12:01 am ET

What with millions of recalled cars, a battered brand image and tanking sales and residuals, Toyota dealers are beginning to rage -- and they were due to give company executives an earful in Orlando, Fla.

That's not just unusual; that's unheard of.

Even during the first two weeks of the current recall crisis, it was hard to find one of Toyota's famously loyal dealers who squawked openly. But as they descended on the National Automobile Dealers Association convention in Orlando -- and the crisis showed no signs of abating -- retailers were singing a different tune.

"There's a goddamned gap in communication," says Mike Sullivan, a Toyota dealer in Los Angeles.

Dealers say they were caught flatfooted three weeks ago when the company recalled 2.3 million vehicles for faulty gas pedals and suspended sales of eight models.

"I think it will come out why Toyota did not include the dealer partners in the discussions on how to approach this PR disaster," says Fritz Hitchcock, owner of three Toyota dealerships in the Los Angeles area.

Some dealers are taking matters into their own hands. Nervous Southern California dealers have hired Michael Sitrick, who has managed PR crises for everyone from bailed-out insurance giant AIG to Paris Hilton.

Indeed, there's trouble in Toyota City. Edmunds.com now predicts that Toyota Motor Sales U.S.A. will slip behind Ford Motor Co. in the U.S. sales rankings this year for the first time since 2006. Edmunds sees Toyota market share falling from 17 percent in 2009 to 16.45 percent this year.

Consumers continue to stray from the brand, and residual values have been hammered, according to BrandIndex Service and Kelley Blue Book.

"The perception gap used to be way in Toyota's favor," says James Bell, a market analyst with Kelley Blue Book. "Toyota had locked up so many people who weren't even giving other brands a chance.

"Toyota still has a loyal owner base, but now a healthy percentage of consumers are saying they will take a look at other brands."

A Kelley study released Wednesday, Feb. 10, found that 27 percent of the shoppers who said they were considering a Toyota be fore the Jan. 26 recall had crossed the brand off their list. That's up from 21 percent who changed their minds about buying a Toyota in the first week of the crisis.

Toyota sales plummeted 19 percent in January, and market share collapsed as some of its top models, including the Camry and Prius, have come under fire for unintended acceleration and defective brakes.

"Dealers will be talking [at the NADA convention] about how this will affect their investments as a dealer," says Hitchcock. "You bet I am questioning my investment. I think they have handled this poorly."

Says NADA Chairman John McEleney, a Toyota dealer in Clinton, Iowa: "Dealers know this is serious in the short term, and there are long-term concerns about the brand and resale value."

But he adds: "I think Toyota has done a very good job of communicating with the dealers from Day One.

"There are a lot of things the dealers can't control. Dealers don't have a lot of say."

Says John Horton, owner of San Francisco Toyota in San Francisco: "My head's not in the sand. There are concerns, but I believe Toyota is doing a good thing. We have some work to do, but in the long term, I don't think it will hurt the brand. Toyota will take care of us and the customers."

Still, dealers say the company must learn from its missteps.

Toyota "has gotten a little too arrogant and complacent," says Sullivan. "Volume was more of a priority. I think they took their eye off the ball on quality. Toyota got caught in this one."

BrandIndex Service in New York, which surveys consumer brand perceptions daily, says Toyota's scores have declined since Jan. 26, when sales of the eight models were suspended.

"We're getting bashed, so everybody's quite concerned," says Earl Stewart, a Toyota dealer in West Palm Beach, Fla. "Toyota screwed up. They played this poorly, but I don't think it was a cover-up. I think there was a lack of coordination between the U.S. and Japan. They didn't anticipate the public reaction."

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