A Wall Street Journal article last week (subscription may be required) noted that Toyota has accelerated its cost-cutting efforts. The world’s leading auto producer by volume has requested the help of its key suppliers to meet a goal of reducing the cost of component parts by 30% in the next three years.
Toyota has been garnering considerable negative perceptions in the U.S. market of late. First, a multitude of major product recall incidents has tarnished the company’s previous stellar reputation as a producer of reliable vehicles. Second, the effects of near two years of global recession coupled with some business missteps has had a severe impact on Toyota’s sales growth and lack of profitability. The company expects to suffer its second straight year of loses, and has lost some market share in the critical U.S. market.
This latest initiative, despite the need for the company to repair its balance sheet, is rather untimely and fraught with more risk. Toyota owners already have building concerns about the company’s building lapses in vehicle quality and reliability
I like others have been a loyal Toyota owner, having purchased multiple vehicles over the last ten years. I must admit that I too have noticed a noticeable deterioration in reliability. Our 2004 Avalon has experienced three major part failures this year, which is very worrisome, and I suspect that our experience may not be an isolated one. We, along with other Toyota owners, wonder aloud whether the so-called “sticking accelerator” problem reported among a group of sedans is limited to just a certain few vehicles or is more widespread.
It seems that ever since the bulk of vehicle production was shifted outside of Japan, quality seems to have slipped over time. My evidence point is that our 1999 Toyota SUV, which was built and exported from Japan, continues to perform in the traditional Toyota manner.
Pushing suppliers even harder to achieve significant further component part cost reductions without a context to the root-causes of eroding quality and reliability is risking even more damage to the Toyota brand. A look back in history when major U.S. OEM’s such as Chrysler and GM embarked on similar initiatives with their suppliers would indicate a disastrous impact on the reliability of vehicles.
Toyota should know better than to embark on an accelerated road toward destroying its brand and owner loyalty. Let’s hope that they do due diligence to both business and reliability needs.
What’s your view? Does Toyota have other options besides extracting more cost reductions in parts?
Does this mean the average Toyota retail price will drop 25% in the next 3 years? That would be great, IF the quality does not continue to suffer. It does not seem that Toyota is priced 20-30% higher than the Korean cars that seem to be getting market share. Perhaps I am too focused on the 30% number, but why 30%? I will certainly stay tuned!
Happy New Year Bruce,
The key risk for Toyota is absolutely further deteroriation in overall quality. Korean automakers such as Hyundai have maintained consistent quality, and attracted more consumer interest by offering more standard options in vehicles, perhaps standardizing on overall component needs. My key thought for this commentary was that Toyoya not suffer the same long-term quality erosion consequences that Chrysler and GM previously experienced.
Bob Ferrari