Toyota battles Detroit 3 with cheap loans

hgreimel@crain.com

TOKYO — As consumers struggled with tight credit, Toyota Motor Sales U.S.A. last week started offering no-interest loans on 11 models.

The incentives are a direct challenge to the financially struggling Detroit 3, which can ill afford an incentive war with Toyota. General Motors launched no-interest loans Oct. 1.

"Dealer traffic is decreasing," Toyota spokesman Hideki Homma said here last week. "We needed to promptly do something."

Analysts said Toyota is in a better position to pay for the incentives than its money-losing Detroit rivals.

"This is a great marketing ploy when people think there's no credit out there," said Christopher Richter, an auto analyst with CLSA Asia-Pacific Markets. "I don't think the costs to Toyota will be that great."

Plummeting sales

Jim Press, former president of Toyota Motor North America Inc., said at the Paris auto show: "Toyota's doing what they do best. They're going to increase share when everyone is struggling." Press is now co-president of Chrysler LLC.

Japan's biggest carmaker saw a 32.3 percent drop in U.S. sales last month.

Toyota's offer runs through Nov. 3 and will cover loans from 36 to 60 months, depending on the model. The qualifying nameplates are the Camry, Corolla, FJ Cruiser, 4Runner, Highlander, Matrix, RAV4, Sienna, Sequoia, Tacoma and Tundra.

"We gotta try something,'' says China Arbuckle, general sales manager of Bill Page Toyota in Falls Church, Va. She said consumers are wary because lenders are offering loans only to the most creditworthy customers. "We can't just sit here and do nothing," she said.

Toyota reduced output in the United States in September to match falling demand. It produced 110,726 vehicles in the United States last month, down 15.8 percent from September 2007.

Although Toyota offers 0 percent loans on the Tundra, it says it will resist a sales war with the Detroit 3 over full-sized trucks.

Jim Lentz, president of Toyota Motor Sales, said at the Paris auto show: "I don't want to get stuck in the middle of Ford and Chevy battling for the No. 1 truck this year, and Dodge launching the Ram."

Toyota had hoped to sell around 20,000 Tundras a month this year; September sales were just 7,696 units. The automaker stopped all Tundra and Sequoia production on Aug. 8. It is scheduled to resume in November.

Incentives for gas-savers

Toyota's inclusion of small cars such as the Corolla and Matrix in its 0 percent plan is a sign of the industry's stress, says Junichi Yamaki, senior vice president for auto analysis at Moody's Japan. Combined U.S. sales of the two small cars fell 27.9 percent in September despite high gasoline prices.

Bob Carter, Toyota Division general manager, said: "We have the capacity through Toyota Financial Services to finance or lease them." c

Peter Brown, Mark Rechtin, Philip Nussel and Patricia Scott contributed to this report

You can reach Hans Greimel at hgreimel@crain.com

0

Shares

ATTENTION COMMENTERS: Over the last few months, Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Newsletters