Page 163 - Toyota Under Fire

TOYOT A UNDER FIRE

of Chrysler and Ford, while GM had more than 6,000. Toyota
dealers averaged 1,600 vehicles sold per year, compared to an av-
erage of 500 for Ford.* Higher volumes and higher profitability
mean that dealers can more easily invest in customer relationships
rather than trying to keep costs to a bare minimum. The profitable
dealer strategy, which the Detroit Three attempted to copy during
the recession by shutting down small dealers across the country,
meant that each Toyota dealer could weather the storm of the recall
crisis and maintain a positive relationship with customers. TMS
also took steps to limit the financial impact on dealers.
Steve Gates, an 18-year Toyota dealer, recalls that at a dealers’
meeting in the heat of the crisis, “Jim Lentz [president of TMS]
and Bob Carter told us that they would do whatever they could
to keep us going and give us the ability to satisfy every customer
coming through the door.” In terms of direct financial support,
TMS put together a fund to help defray dealers’ costs. Rather
than prescribe specific ways of spending the money, Toyota pro-
vided cash and trusted the dealers to spend it in ways that made
the most difference to customers. Carter says, “I took $30 million
and I cut it up 1,223 different ways [the total number of Toyota
dealers], sent a check out to the dealers, and said, ‘You know what
your customers want.’ I’m not going to make the decision whether
a customer wants a $50 Starbucks card.” Toyota also paid the in-
terest expense on the cars the dealers had in inventory during the
sales stoppage. Gates also says that Toyota paid more than a rea-
sonable reimbursement price for the recall repairs, which made a
big difference, since repairs are the main profit generators for many
dealerships. While it’s just one data point, Gates notes that each

* Dan Reed and Chris Woodward, “Detroit Wants to Thin the Herd of Deal-
ers,” USA Today, February 10, 2009.

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