Lexus: Wait until next year

LOS ANGELES -- Lexus General Manager Mark Templin is firing back at critics who say the glory days are over for Toyota's luxury division.

What's true is that Lexus' 13-year streak as the top-selling luxury brand in the United States will end this year -- thanks to recalls, the Japan earthquake, the Thai flood, a strong yen and a fallow product cadence.

This year Lexus will finish third in the prestige-brand U.S. sales race. Through October it sold 153,739 vehicles, down 16 percent. Mercedes-Benz was tops at 206,632 sales, and BMW was second with 199,552.

Much of the decline resulted from Lexus having blown out its inventory just as the March earthquake hit. Because of Lexus' reliance on a Japan production base -- all models except the RX 350 are built there -- its inventories were crippled until last month. It will be the first quarter of next year before dealers are even close to what they need in terms of days' supply.

But Templin said in an interview: "We're back up and rolling really good." Next year "is going to be a big year."

For one thing, four redesigned Lexus sedans will debut before the middle of 2013.

Templin declined to give a target volume for 2012. But he predicted U.S. sales of luxury vehicles will rise by 100,000 units next year and said Lexus will see significant growth.

All four of Lexus' core sedan lines will be redesigned, starting with the GS 350 and GS 450h sport sedans arriving in February, followed by reworked versions of the ES 350, IS 250 and 350, and LS 460 and 600h.

In early 2014, the redesigned volume-leading RX 350 crossover will arrive.

With the GS 350, Lexus hopes to redefine the way luxury consumers perceive Lexus. For years, Lexus has been seen as the ultimate luxury appliance: smart, bulletproof, soulless.

Positioned against the dominant Mercedes E class and BMW 5 series, the GS has repeatedly missed the mark, with vanilla styling, vague handling and disappointing sales results. But Templin says the new GS' bolder design and sportier driving dynamics could change the brand's image.

Accompanying the launches will be a big boost in Lexus' marketing budget, including the brand's first appearance during the Super Bowl. Templin gave a hint at what to expect.

"Car ads are not beer ads that do something funny to capture attention," Templin said. "We want everyone to know that there is a new face of Lexus. We are going to tease a lot of what is coming after the GS, too.

"We've got a whole generation of 40- and 50-year-olds who don't want to grow old and want to look cool in their kids' eyes," he said. "So they are letting their kids pick their cars. We have to appeal to both audiences."

Templin also hinted at a further upgrade of Lexus' customer service but declined to give details.

"We're going to see an even more dramatic effort on creating exceptional customer experiences, both at the corporate and dealer level," Templin said at the media introduction of the GS sedan. "This isn't just customer service. It's sales. It's marketing. This is more important than social media."

Working against all these plans is a yen-dollar exchange rate that isn't likely to change anytime soon.

"The yen is the biggest challenge we face," Templin says. "But we have to price against the heart of the market. We don't expect the yen to stay at 76 [to the dollar]. We don't make long-term decisions based on the exchange rate today."

Asked whether Lexus still makes a profit in North America or is dumping its vehicles here at a loss, Templin says: "We're seeing smaller margins than we're used to -- or no margins. But we'll stop producing cars if we're going to lose money on every car."

Templin says Lexus' growing global presence helps even out the currency stresses. While North America is still the dominant sales market, he says, 87 countries either are selling Lexus vehicles or are interested in doing so.

"Our brand is in a really good place," Templin says. "After the last four years, to be where we are is pretty incredible."