Toyota Takes Aim At U.S. Sales Slump With Prius

2010 Toyota Prius i i

The 2010 Toyota Prius is roomier, more powerful and has more gadgets than previous models. Bryan Mitchell/Getty Images hide caption

itoggle caption Bryan Mitchell/Getty Images
2010 Toyota Prius

The 2010 Toyota Prius is roomier, more powerful and has more gadgets than previous models.

Bryan Mitchell/Getty Images

Struggling U.S. automakers have gotten most of the attention lately, but the collapse of the new-car market has hit Toyota, too. The Japanese auto giant's sales fell by more than 30 percent in June compared to a year ago, and for the third month in a row Ford sold more vehicles than Toyota.

To deal with the challenges, Toyota has selected a new president. Akio Toyoda, the grandson of the automaker's founder, is just 53. He's a young corporate leader by Japanese standards, and his appointment — sooner than expected — is intended to convey that the company plans to be aggressive in addressing its problems.

So far, Toyota's redesigned Prius hybrid is selling well in Japan and in the U.S. When Prius first entered the U.S. market a decade ago, its appeal was somewhat limited. Today, it is deliberately marketed as a mainstream American car that gets 50 miles to the gallon.

After a test-drive of a 2010 Prius, I can report that it's roomier, more powerful and has more gadgets than previous models.

Over the past few years, Toyota's overall sales in the U.S. have grown dramatically — from about 9 percent of the market a decade ago, to nearly 17 percent in 2008.

But Jeff Schuster, executive director of global forecasting at J.D. Power and Associates, says Toyota is not immune to the industry's woes. The number of cars sold in the U.S. is down sharply, and the automaker's share of the U.S. market actually declined in recent months.

"Toyota is not used to dealing with sales declines — it is definitely new territory," he says. "I think that's why some of the management changes are taking place. That's why we are seeing talk of refocusing."

The growth and expansion mentality that served Toyota well may no longer be the right approach for the U.S. market. "I think it's going to be, 'Let's slow things down; let's put the breaks on a little bit,' " he adds.

Right now, Toyota has excess production capacity in the United States. What's more, quality, which is something Toyota is known for, has suffered a bit on some models, according to John Paul MacDuffie, an auto industry expert at the University of Pennsylvania's Wharton School.

He suggests Toyota had moved too quickly to rush new products to market.

"Toyota has been a leader in reducing the lead time for new vehicles. It was four years, three years, rumored to be 18 months. But if you get quality problems, it's probably not worth it," MacDuffie says.

Toyota recently announced it will build more physical prototypes during the development process and not rely so heavily on digital models.

"You know, I think they do take quality issues and the improvement process seriously, and [in] the J.D. Power quality numbers that just came out, Toyota was back on top," MacDuffie says.

That survey ranks initial vehicle quality. Toyota and its sister brand Lexus had more segment awards than any other automaker. But Toyota has yet to regain the automatic "recommended" rating it used to get from Consumer Reports.

Toyota faces other hurdles. Running a big, global company of any kind is tough, and competition from Korean carmakers and others is getting stiffer. What's more, as the No. 1 automaker, everyone is gunning for you.

Nonetheless, experts believe the Japanese giant — with its fuel-efficient technology, new leadership and loyal customers — remains well-positioned to remain on top of the automotive world.

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