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Wednesday, December 07, 2005

Toyota: Paper Tiger

The great supposed "threat" to the Big 3, at least in the media's eyes, is Toyota. To them Toyota is the perfect representative of the Japanese perfect car. It is a car that is utterly reliable, non-polluting, and inoffensive. It is something though that does not exist.

Toyota is a company with many weaknesses. It is only their fantastic performance in America that masks many of these weaknesses. Were it not for the American market, Toyota, like most Japanese car companies, would be near bankruptcy.

Why? Toyota is the GM of Japan. They own Daihatsu, a maker of small cheap cars that are not sold in America but have a small presence in Europe and Japan. Hino, a large truck maker is a presence. And finally they now own Subaru. They also own a significant percentage of the Japanese domestic market, a percentage similar in size to GM's in the 1950s and 1960s. However it is a percentage of the market that is stagnating, along with the entire car buying market of Japan.

In Europe Toyota's marketshare is quite small. For most of their time in Europe, their efforts have largely been unprofitable. Like most Japanese manufacturers they were slow to adopt diesel engines, and this has harmed them considerably in Europe where diesels make up nearly half the market. It has doomed Lexus to a marginal existence on this continent.

So Toyota's future is utterly dependent on America. Failure in America means failure overall. This is a risky proposition. Toyota is a culturally Japanese company forced to depend on a culture buying its product that is very alien to it. Cleverly Toyota has hired and given great power to American managers to run its operations. Most of its products sold in America are built by Americans. Toyota has an enormous presence in America, a presence so great that many consider it to really be an American company.

However, it is not an American company. It is a Japanese company. It does not have the styling legacy and history of an American company. There are far fewer fans of its vehicles than there are for GM, Ford and Chrysler. There is no cult surrounding the Camry, few obsessive Celica fans, even the Supra's fanbase is small. Toyota's great classic vehicle, the 2000GT draws heavily from European designs (in fact its looks were designed by Europeans), and though a collector item, most Americans would be hard pressed to know anything about it. Yet Toyota is slowly dominating the US market.

Why? Simply because it has no competition from the Big 3. The Big 3 refuse to match Toyota's reliability, or basic aesthetics. In terms of reliability they may not be able to. It may be based on a culture and organization within Toyota that allows the company to create very reliable products. In terms of aesthetics, the cars that the Big 3 build to compete against Toyota are typically uglier. That in itself is amazing.

Internet car pundits will complain that the Big 3 make cars that are primitive in comparison with Toyota. Many Big 3 cars use pushrod engines. These are seen as primitive. They really aren't, but that's beside the point. They have an image of being primitive. The truth is though that the average car buyer has no idea what overhead valves are, or what pushrods are. They simply want a car that looks good. If they fail to find that, they look for a car that is competent, sometimes safe.

Toyota can be beaten. I have never heard of Toyota's as being particularly safe, and certainly never beautiful. There is a reason why Toyota's have no hardcore following. Their cars are dull. They always have been, and will continue to do so. Like GM they have a culture that permeates into the products they make. That culture influences them, and forces them to create dull but competent products. GM's culture forces it to make even worse.

The Big 3 could destroy Toyota in a generation. IF they made stunningly beautiful products, with a modicum of reliability, Toyota would be bankrupt. Can it happen? We have seen small examples. The Chevrolet Corvette. The Ford Mustang. The Ford F-150. The Chrysler 300C. And now the Ford Fusion. These are cars that are good looking, not necessarily well built. All sell well. All convince many people who fear driving a less reliable car into a risky buy because the vehicle they are attracted to is beautiful.

Cars are an "impulse buy" to use a tired phrase. They really are. Their purchases largely defy logic. Societies would run better without them. It would be more efficient if we all used massive public rail systems with only the occasional vehicle use. But we have chosen a different path. We have chosen the car. Now it's time to embrace it.

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