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CSpec

Newly Stalled Toyota Blocks Rivals, Too

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Newly Stalled Toyota Blocks Rivals, Too

From the Wall Street Journal.

When a car breaks down ahead of you, it isn't unusual to feel a certain deplorable smugness as your own engine keeps purring. But the poor unfortunate stuck in the road can still slow you down.

Take Toyota Motor, which Tuesday rolled out new customer incentives to help repair the damage from its recall fiasco. Of all foreign rivals, Toyota epitomized the competitive pressure that has ground down the U.S. market share of Ford Motor, General Motors and Chrysler for decades.

The televised unraveling of Toyota's reputation for quality could only be good for Detroit, right? Ford, for example, certainly capitalized on Toyota's woes, with sales growth in February busting through analysts' estimates.

Toyota's resorting to incentives, however, raises the worrying prospect of a price war. Indeed, industrywide, average incentives rose month-on-month in February by 10.6% to $2,588 a vehicle, according to Edmunds.com, as Toyota's competitors tried to lure away customers. Rebates and cheap financing are useful for winning business, but they undermine the No. 1 priority for the Detroit three: restoring profitability in North America.

As if in response to Toyota, GM on Tuesday offered 0% financing for 60 months or more on a range of 2009 and 2010 models, following a weak February and a recall of its own. Brian Johnson of Barclays Capital estimates such financing costs $4,657 a vehicle, more than $2,000 above last month's industry average incentive package. The key question is whether this is temporary or signals a broader breakdown in pricing discipline. After all, consumers are still hurting and the industry remains structurally oversupplied.

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I think it has a lot more to do with the true market conditions out there (Yes Virginia, there really is a recession for everyone except Wall St.) than it has to do with Toyota.

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I think given the economy in Ohio right now a bunch of people here will be walking.

One of my sons' best friends girlfriends parents are loosing their home...another family I know is loosing theirs...right now...methinks Olds is right...people need to eat...

Chris

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