With Toyota Down, Rivals Start Kicking

Written by Charles Krome
Date : 02/01/2010

Toyota may be far from dead, but that hasn't stopped the vultures from starting to circle. The lawsuits have started, with Toyota owners claiming to have suffered "emotional distress" from the recall situation. And the congressional investigation is gearing up, with a panel scheduled to begin hearing complaints at the end of this month.

Oh, and let's not forget the new incentive campaigns aimed at current Toyota drivers. So far, General Motors, Ford, Chrysler and Hyundai are all offering a combination of cash and financing deals geared toward getting Toyota/Lexus/Scion owners into their own products.

Interestingly, Honda is asking its own dealers to avoid what it's calling "predatory" practices — which I'm sure isn't related (to) the fact that Ford dealers have extended their incentives to Honda/Acura drivers, too.

But business ethics can be a tricky — if not oxymoronic — part of the industry, so let's just focus on moving the metal here, starting with Hyundai.

Hyundai Targets Small Cars

As one might expect, the surging South Korean juggernaut is taking a pretty canny approach to the situation. While Hyundai wasn't going to be the first company to attack Toyota, it certainly wasn't going to let Ford or GM gain a competitive advantage in the marketplace. The solution: A smaller-scale campaign, in theory lasting just a few days, that would only cover a few Hyundai vehicles: the Hyundai Sonata, Hyundai Elantra and Hyundai Elantra Touring.

It's a smart strategy: Hyundai doesn't want to miss out on defecting Toyota customers, but it doesn't want to seem as opportunistic as GM and Ford. This plan lets the South Korean test the waters, and do so with vehicles that are nearing the end of their life-cycles anyway. A new Sonata and Elantra are both due later this year, and offering incentives on cars that are already Toyota-competitive should help clear out the 2010 inventory.

The Elantra/Elantra Touring are counterparts to the Toyota Corolla/Toyota Matrix, and the Elantra already starts with an MSRP that's about a grand under the Corolla, while the Elantra Touring is about $700 less expensive than the Matrix. With a further $1,000 in anti-Toyota incentives, customers could be ending up with some real bargains. And that's even though, looking only at the 2010 models, this is one segment in which Hyundai does not start with the upper hand. If nothing else, the Corolla is a better looking car than the Elantra, and the two Toyotas also outperform their Hyundai rivals at the gas pump.

Chrysler Tackles Toyota Trucks

Similarly, Chrysler is taking a smaller-scale, more tightly focused approach to zinging Toyota. The Pentastar people are limiting their incentives to current owners of the Toyota Sienna, Toyota Tundra and Toyota Tacoma, although it's only the Tundra that's affected by the current recall.

This move clearly plays to Chrysler's strengths, and shows some good timing, too. With the 2011 Sienna on its way, I'm betting there was already a more-than-normal number of current owners in the market, and the Dodge Caravan Chrysler Town & Country are two very strong alternatives to Toyota's minivan. Chrysler doesn't offer a good direct option to the Tacoma compact pickup, but I'm confident more than a few Tundra drivers will take advantage of the Chrysler cash to test out the award-winning Dodge Ram 1500.

Ford Targeting Honda, Too

At Ford, the incentives grow even wider: as I mentioned, the Blue Oval is including Honda and Acura owners in their current round of Toyota targeting. I'm not sure what that's about; if Ford didn't want to look like it was picking on Toyota, why add just one other OEM to its target list? And if the Blue Oval was specifically hoping to boost Ford Fusion sales by aiming incentives at its better-selling rivals — like the Toyota Camry and Honda Accord — why not add Nissan and the Nissan Altima, which also outsold the Fusion in 2009?

Regardless, I'll be especially curious to see how/if Ford dealers will be able to translate the situation into more sales for the Ford Taurus and Lincoln MKS. Toyota's answer to the Taurus is currently the Toyota Avalon, a car that just never caught on among U.S. drivers in the way the company's smaller vehicles have. In 2008, when it competed against the previous-generation Taurus, the Ford outsold the Avalon by about 5,000 units. Last year, the new Taurus ended on a high note, scoring a 109.7 percent sales jump in December and achieving annual sales of 45,617 units for 2009. The Avalon December numbers were down just 1.9 percent, but annual sales plummeted 37.1 percent, giving the Ford an 18,000-vehicle sales cushion for the year.

On the more luxurious side of the spectrum, the Lincoln MKS, which has had its troubles gaining attention in the marketplace, still managed to outsell its Toyota competitor, the Lexus LS, by about 6,000 units in 2009.

I'm thinking the two big Ford sedans will also be able to pick up customers coming from Toyota/Lexus crossovers and SUVs, too — as should, naturally, vehicles like the Ford Escape, Ford F-150, Ford Flex and Lincoln MKT.

I suppose Toyota should count its blessings that the new Ford small cars — the next-gen Ford Focus and Ford Fiesta — aren't yet in production and able to benefit from these new incentives.

A Risky Approach for GM

Finally, we come to GM, the company that kicked off the Toyota kicking. The General is walking a particularly fine line here: On the one hand, I can certainly see how it was tempted to make this move. On the other, GM also has spent untold years and resources trying to convince customers to buy its vehicles based on product quality, not just low cost. That big GM campaign was "May the best" — not the cheapest — "vehicle win," right? And GM better be prepared for a taste of its own medicine if problems with key future launches, like that of the Chevrolet Volt, leave the company open to some Toyota revenge advertising.