As Scion slips, Toyoda urges patience

TOYOTA CITY, Japan -- Akio Toyoda, scion of Toyota Motor Corp.'s founding family, has words of encouragement for Scion dealers who have soured on the brand's shrinking sales: Hang in there.

But he admits new product won't be coming any time soon.

"We will continue with Scion," Toyoda told Automotive News. "But Toyota has limited resources. We need to prioritize. I have been telling them they will have to wait a few years."

Toyoda, the company's president, cited competing demands on Toyota's global empire, including fresh investments into Lexus, new fuel-efficient drivetrains and even trucks. The company can't do everything at once, he said.

Indeed, Toyoda has put all capacity-expansion projects on hold, in part because of a concern that the company was trying to do too much at once. He indicated that that freeze won't be lifted soon. He also said Toyota is still in regrouping mode after being hit by the global financial crisis, unintended-acceleration recalls and the massive Japan earthquake of 2011.

Toyota is poised to go on the offensive again with better products, thanks to a refocus on customer needs and Toyota's new modular development strategy, Toyoda said.

"Going on the offensive means making ever-better cars and changing the way in which we produce cars," he said. "We expect to see a totally changed landscape in our plants."

While executives have no plans to pull the plug on Scion, it will be a few years before the lineup is injected with new product, he said. He declined to be more specific.

Toyoda also implied that Scion has drifted from its original mission.

"The concept of the Scion has changed since its launch. It was supposed to do what the Toyota brand couldn't," he said.

"It started winning volume, and that can be done by Toyota. We wanted to attract customers who weren't satisfied by Toyota or who might be future Toyota customers."

In August, Toyota told its U.S. dealers that there are too many Scion franchises, and that they are free to give up the youth-oriented brand without facing penalties.

Toyota spokesman Brian Lyons said the company would not disclose how many dealers have chosen to drop their Scion operations. But he said 998 of Toyota's 1,234 dealers have a Scion franchise. There are no stand-alone Scion dealers, and that count approximates the roughly 1,000 Scion dealers in operation in August, when Toyota gave them permission to leave.

"Scion encouraged its dealers to ask themselves if the Scion brand is still right for their market and their business," Lyons said. "There is a perception among some dealers that they are expected to sell the Scion brand, and this is not the case."

Toyoda acknowledged dealer frustration. "Some just don't want to wait," he said. "It's a matter of whether dealers trust my word to wait."

Much of the five-car lineup is due for a redesign, Toyoda noted.

The brand has added the FR-S sporty coupe and the iQ subcompact in recent years. But the xB and xD hatchbacks haven't been revamped since 2007, while the tC sport coupe was redesigned in the summer of 2010.

Scion's U.S. sales peaked at 173,034 units in 2006, just three years after its 2003 launch, then slid to 45,678 in 2010, before rebounding to 73,505 in 2012.

Through October, Scion sales slid 5 percent to 59,030 in a market up 8 percent. Only sales of the FR-S, developed jointly with Subaru, are up this year.

Dealers clamoring for new product may be encouraged by chatter about a possible subcompact crossover or an FR-S convertible, a concept of which was shown at this year's Geneva auto show and at the August dealer meeting. Toyota has not said whether it plans to build the convertible.

In the meantime, Toyoda said he is rebuilding the company with a back-to-basics focus so that it will be more competitive in the coming years.

Part of the overhaul will bear fruit in 2015, with the debut of the first cars developed with the new modular strategy dubbed Toyota New Global Architecture. The goal is to use common parts, cut costs and redouble the focus on clever engineering.

"Why don't we make these cars smarter? And the answer was TNGA," Toyoda said.

But another issue being addressed, he said, is that the company's rapid expansion in the early 2000s outpaced the rate at which it could train workers.

"If I may use the analogy of an athlete, it's like he spent more time in actual competitions, rather than enough time in training, being given challenging targets to attain," Toyoda said. "What we are doing right now is enhancing the physical flexibility of those athletes.

"When they say, 'We want to enter the competition,' we tell them to wait for a while."