One on One with James Lentz, President of Toyota USA
Tuesday, May 19, 2009
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SUSIE GHARIB: More reaction now to those new fuel economy standards announced by President Obama today. A short while ago I talked with Jim Lentz, the president of Toyota USA, who attended the White House ceremony. My first question: will consumers buy light weight fuel efficient cars?
JAMES LENTZ, PRESIDENT, TOYOTA USA: I think they will. Because I understand as well with this new standard that we'll see, it's not just smaller cars we'll have to improve their fuel efficiency; it's all vehicles. So whether they're small cars, mid, large, SUV's, full size trucks, they are all going to have to increase their overall fuel efficiency. So I think consumers are demanding that today.
GHARIB: But Mr. Lentz and I'm sure you hear this a lot, people say why do I need to buy a green car when gas is so cheap?
LENTZ: We do hear that occasionally, but we really heard that when there was a huge change in the price of gas. We certainly weren't hearing that when it was $4.50 a gallon. When it dropped below $2 a gallon there was a move back towards full size trucks. But from what we have seen in the marketplace, is it's not necessarily absolute price of gasoline. It's the change in the price of gasoline that drives consumer behavior.
GHARIB: What's going to be the financial impact of these new standards on Toyota? Won't your profit margins go down because of higher production costs?
LENTZ: Well, not necessarily higher production cost. There will be increased costs in R&D. We'll have to invent more fuel efficient internal combustion engines, new transmissions, new use of light weight steel, new narrower interiors with new seat technology, so there are going to be a lot things that we have to do. It will probably be pushed onto the market, so in time the consumer will have to pay more for these vehicles, but the hope is that they will save enough in improved fuel economy to offset that increased cost.
GHARIB: Mr. Lentz, Toyota seems to be at a cross roads. It recently announced a big quarterly loss, its first in 60 years. A new president comes on board next month. What's Toyota's competitive strategy going forward?
LENTZ: I think our competitive strategy going forward is continue to listen to the customer and build what they need. Because if you look at it in the end, it's not going to be shareholders or stockholders or government programs or new regulation that decides who wins or loses. It's really going to be manufacturers that can provide the products that offer value, quality, reliability, durability that takes care of customer needs, serviced and sold through great dealers, that's who will win and lose in this marketplace.
GHARIB: I know Toyota like all the auto makers have been struggling because of a slowdown in car sales, but how's business these days? Are you seeing any improvement in sales?
LENTZ: I think we're seeing a pickup in May. May typically is a pretty good sales month. So sales so far this month are up about 15 percent from what they were last month. They're nowhere close to year ago sales. But I think we will see gradual improvement this year. I don't think we're going to see real improvement until next year.
GHARIB: Now, you announced yesterday a new generation model of the Prius. What kind of sales numbers are you expecting from that, especially since you're getting a lot of competition now from Honda's Insight?
LENTZ: I think it's great that Insight is in the marketplace because Toyota has had 75 percent of that hybrid market. So we have really been pushing hybrids for the most part by ourselves. So with Honda in the market it creates more shoppers. The first full year of sales which will be next year we're anticipating 180,000 sales. We have about 20,000 sold orders already on the new car. So we're very, very excited about launching this car in today's market.
GHARIB: As General Motors and Chrysler are struggling for their survival, are you finding that people are considering to buy a Toyota? Is there any impact of the GM and Chrysler situation on your business?
LENTZ: Not necessarily so. If you look at consumers and what they shop, we have very little cross shopping with either Chrysler or General Motors. So we really haven't seen an uptick in our business as a result of the challenges that they've had of late.
GHARIB: So what is the biggest challenge facing Toyota right now?
LENTZ: I think the biggest challenge right now is the overall size of the market. We were a marketplace that if you look at the last four recessions, the market dropped from peak to valley about 23 percent. We're seeing a peak to valley drop in this recession of 41 percent. So the biggest challenge we have is just not seeing enough customers in the showroom, in a market that is depressed down to around the 10 million unit level.
GHARIB: All right, Mr. Lentz, thank you so much for coming on the program. We really appreciate your time.
LENTZ: You're welcome. Thank you.
