Holy NSFW. When Toyota’s No. 1 American executive steps up to the microphone and declares that his employer’s ready for the fallout from a GM Chapter 11, you might as well stamp “done deal” on the, uh, deal. The AP reports that “Toyota Motor Sales USA President Jim Lentz says his company shares about two-thirds of its 500 parts suppliers with GM. . . only a small number of Toyota suppliers are critically short on cash.” Of course, we knew that already. Both the GM and the supplier thing. But still. You gotta wonder: is Jim Lentz sticking the knife in GM to goose ToMoCo’s April and May sales. According to Automotive News [sub], Lentz says US auto sales may rise in the second quarter. Well they will for someone.
And that someone believes they have a higher quality of customer.
Lentz said Toyota has no plans at present to match the incentive programs of Hyundai, General Motors and Ford Motor Co., which cover car payments in case of job loss.
“We are really listening to our dealers, and thus far they are telling us that it’s really not a discussion on the showroom floors,” Lentz said.
Don’t ask, don’t tell? Lentz’s remark also shows a remarkable insensitivity to the working stiffs who are scared stiff at the prospect of buying a new car and losing their livelihoods. Man, these guys sound more and more like GM every day.
WOW!! This is WONDERFUL NEWS!! Who’d of thought??
:)
Now children, if you don’t be good little boys and girls you may grow up to be just like your Uncle General Motors…you don’t want that, do you?
Is Mr. Lentz to assume that people who buy other makes of vehicles low-life scum? RF you are right. Toyota sounds exactly like GM did (does) when they were number one. Let’s hope Toyota does not end up like GM – going bankrupt.
We’re ALL ready for GM’s C11
I don’t think he’s being arrogant or cocky…he is telling it like it is.
Yeesh, did the designers of that truck steal the ugly stick from the Scion designers?
Big mistake – in this economy, no-one’s safe (unless you work for a govt of course).
Toyota BK in 25 years? Is Toyota 00’s same as GM’s 70s?
Well, most sub-prime auto loans are for domestics…highest repo-rate
That unemployment insurance is more psychological anyway. If I feared to lose my job I wouldn’t buy a new car. Period. I guess it helps selling some vehicles, though.
In case of any supplier going bankrupt, Toyota can just buy them. They have enough cash, and once the millions of GM and Chrysler stored all over are sold they have much higher sales.
There might be some trust-law issues, but they could be legally allowed to collaborate with Ford, and other OEM to temporarily buy suppliers.
It sure would beat the federal government pouring money into the suppliers.
The German and Japanese car industry was bombed away in WWII and came back quickly and obviously is strong. C11 for one 20%-market share OEM (that still could operate under C11) sure doesn’t destroy the entire industry. If there is enough demand for cars the Transplants or the Chinese could even take over some factories, take over single brands (Jeep, Cadillac..). all the fearmongering is only so that Red-Ink Rick could cash in some more paychecks. there were hundreds of car companies 100 years ago, most went away and the industry still survived.
All the whining about socialism, but people want car companies to subsidize their bad financial planning to sell product.
Can’t you figure out how much money you have and spend it accordingly? I guess the current crisis says no.
People don’t seem to understand that we “stimulated” ourselves into this mess. All that cash on the hoods of cars after 9/11, all that subsidized credit, all of that got people to buy cars they didn’t really need because: “Oh, okay, fine – I’ll take one”.
Now people are gauging risk and cutting back on their buying of automobiles because they already own one they’re happy with. Funny – this behavior actually makes a lot of sense. If we hadn’t dumped cars in their laps for the last few years, maybe they’d actually need one now.
My point is that every time we short-circuit the correction, we just set up the next disaster. We’re like addicts needing ever-increasing amounts of stimulus. Continuing to come up with new ways to make people buy things they don’t need is just going to result in another crisis when the effect of our latest clever idea wears off.
Personally, I think the thing that has made Toyota different from GM is that, generally, they have been a car company more than a finance company. They may not always build the cars I want to drive, but they do generally build them well, and their production process is admirable. As long as they stick to building quality automobiles, I think they’ll be better off than the General, even if they apparently build them for people with different tastes in cars than me.
@ RF
Told you so.
My (limited, 4th hand) sources tell me Toyota have been to suppliers and said;
1. Our parts are to be made in a soon-to-be legally separate part of your business.
2. You will tell us the margin you need to keep that not-yet-separate division viable.
3. You will be ready to spin off said division.
And the unspoken #4 is; you won’t be making parts at a loss for our competitors.
imag, I agree.
You know this. I know this. GWB knows this. BMO knows this. Maybe 70% of the general population, by now, know about this.
But then again, 99% of drug addicts acknowledges their problems without changing their behavior.
From my own experience, it’s fruitless to educate people about the truth. They either deny it or don’t do anything about it (and hate your for telling the truth). It’s way more easier to make your life better by duping the remaining 30% fools who don’t know already.
I don’t think he’s being arrogant or cocky…he is telling it like it is.
Being factually accurate does not make it any less arrogant to publicly dance on your competitors’ grave. Especially when the body is still moving.
Toyota is well on its way to becoming the New GM. Market share is up while quality is down, and its sense of arrogance is coming along nicely. All it needs now are some ivory towers to better isolate management from reality, and a big fat UAW deal for the workers.
The interesting question is who will become the new Toyota? Honda doesn’t have the global reach to do it, and Nissan seems to be a perpetual second-tier player. The Chinese have potential, but not for a few more years. Ford, Mazda and the Europeans are probably out of the running entirely. My money’s on Hyundai, which is on a major streak. Who else is there?
The US won’t be ready. It will be hard to face that our auto industry is inferior to the rest of the industrialized world. Even the French will feel superior.
I think American soccer is now better than the American auto industry. I like to thank Way-goner, Putz. Nardelli, and Mullally for pissing on the American dream.
Everything really stinks…………
I think your reading too much into it. He has shareholders who have been getting told that a GM bankruptcy would destroy the suppliers and kill the whole industry.
He has every right to reassure the public that Toyota will be ok.
What I don’t understand about this fear of meltdown in the supplier base is this. The need for vehicles will remain the same, whether GM or Chrysler are there to supply the vehicles. So if it’s 10.5 million units, and they’re telling us that the suppliers serve all the manufacturers, then that sounds like it could be good for the suppliers.
They’d be able to make larger production runs of fewer products.
Granted, it’s not as good as making parts for 16 million cars, but it may not be as bad as everyone thinks.
What I don’t understand about this fear of meltdown in the supplier base is this. The need for vehicles will remain the same, whether GM or Chrysler are there to supply the vehicles. So if it’s 10.5 million units, and they’re telling us that the suppliers serve all the manufacturers, then that sounds like it could be good for the suppliers.
It’s bad for those who do a lot of business with whoever files BK, because (a) they’ll get stiffed on what they are presently owed and (b) they can’t just switch to serving a competitor on a dime. So the concerns are legitimate.
That being said, the problem is the opposite of what the media describes — the suppliers were in trouble a long time ago because of how Detroit does business. The domestics have spent years squeezing their margins, so a lot of them were suffering long before the recession hit. The auto oligopoly ensured that they lacked pricing power, so whenever the automakers wanted a pound of flesh, they had no choice but to give it. A shakeout is inevitable in that business.
If we care about the suppliers, then the solution is to let the automakers who survive choose the winners, and let them figure out how to prop up those mission critical companies who need the help. Not all of them would make it, even if GM and Chrysler were bailed out into perpetuity. The better managed companies seem to understand that squeezed suppliers will pass on the savings in the form of higher defect rates (QC suffers when margins are tight), so it’s pennywise pound foolish to pay too little.
The German and Japanese car industry was bombed away in WWII and came back quickly and obviously is strong
The primary reason for the “quick” comeback was due to post-war American help.
This is similar to how it went in the steel industry 10 years ago. There was an excess in capacity caused by easy entry of imported steel at prices the domestic makers couldn’t match (dumping? can’t say for sure…) The (at the time) Big 3 exploited this situation by driving pricing so low that margins were significantly and persistently negative. This caused a big shakeout in the industry (trade duties implemented by the Bush administration were too little, too late), which took out quite a bit of capacity and consolidated the remaining industry. Rapid growth in China took care of any remaining excess capacity, and pricing power switched to the supplier. Countless OEM purchasing people lost their jobs over macroeconomic forces they couldn’t control. Today, the largest producer in the US ArcelorMittal, is headquartered in a castle in Luxembourg. They swept up the remnants of Inland, Bethlehem, J&L, LTV, Republic, Acme and others). However, U. S. Steel and AK Steel managed to survive, and are thriving ( as well as anyone is these days…) So, some will survive, others will die, many will consolidate.
Anyone know what Wilbur Ross is up to these days? He was one of the architects of consolidation in the U.S. steel industry, and got very rich at it.
The most interesting bit is that a normal Chapter 11 would mean nothing effectively changes with the day to day operations.
It’s just lots of trips to the courthouse for the stakeholders, but the guy on the assembly line doesn’t even notice.
This sounds more and more like a liquidation every day.
The General has been good to people over the years, but died penniless. What should we bring to the grieving family? Cases of 10W30 to the RenCen?
Toyota is well on its way to becoming the New GM.
I say BS.
There is dark night (GM) and bright daylight (Toyota) between product, management, financial structure, and importantly CULTURE in those companies.
derm81:
That Marshall Plan was not geared towards one industry, but towards the entire country. Of course, if the country prospers, more cars will be sold (without government help).
but the help was money only, it still takes some engineering to actually build back the industry. So the US should survive, since the factories (as bad as they are) still will be here… under different ownership, perhaps.
the fearmongers act like the suppliers for the remaining producers woudl disappear… some may go C11, but if they are important they will keep producing, and if it is under Totota ownership.
@derm81: Studying history can be educating.
Does anybody really believe that Germany and Japan were helped because of the kindness of the hearts of the Americans? They were helped for reasons of political expedience: There was someone called Stalin. He was about to finish WW 2 and take over the rest of the world. So something needed to be done.
Actually, the first plan was the Morgenthau plan: Turn Germany into an agrarian society. No industry. Cows. The plan was decided in 1944, promptly leaked and used by the Nazis to stiffen the resistance of a horrified Germany. It actually prolonged the war. Treasury has a storied history of unintended consequences. In 1945, the plan was in effect. Germany was on a starvation diet of less than 1500 calories a day. Aid organizations were kept out of the country. The Department of the Treasury plan wasn’t liked by the military, because they knew what was going on on the ground. Unhappy with the Morgenthau-plan consequences, Herbert Hoover said 1947: “There is the illusion that the New Germany left after the annexations can be reduced to a ‘pastoral state’. It cannot be done unless we exterminate or move 25,000,000 people out of it.” The Treasury/Morgenthau plan was replaced by the Marshall plan. General Marshall had been Chief of Staff until 1945 and became Sec State in 1947 (while the Dept. of State was essentially an adjunct of the Pentagon. My former father in law, bless his heart, worked there at the time and was later NATO General Lemnitzer’s aide… Had had many educating stories to tell.) According to Wikipedia, “The Marshall Plan (from its enactment, officially the European Recovery Program, ERP) was the primary plan of the United States for rebuilding and creating a stronger foundation for the countries of Western Europe, and repelling communism after World War II.” In Japan, the adopted program of de-industrialisation in Japan was implemented to a lesser degree than the Morgenthau plan. 1948 the Johnston Committee Report recommended that the economy of Japan should instead be reconstructed. Two reasons: Aid to Japan became too expensive, and the Reds were flexing their muscles. The Korean war finally served as a reason to prop up Japan as a bulwark against communism. The come-back of Japan started later than Germany’s, simply because in Japan nobody stared down the barrels of Russian tanks at Checkpoint Charlie and in the Fulda Gap. Likewise, post-WW II Germany was militarized much earlier than Japan. In Germany, paramilitary organizations existed since 1951, the German Army was officially reconstituted 1955.
So who’s to blame for the resurgence of Germany and Japan? Communism. Isn’t it ironic?
Lentz’s remark also shows a remarkable insensitivity to the working stiffs who are scared stiff at the prospect of buying a new car and losing their livelihoods.
If you are scared at the prospect of losing your livelihoods you should not be buying a new car, because you can not afford it. You should not buy things you can not afford. It is not so difficult to understand.
And Mr. Lentz is not being “insensitive”. He is just being Rational: He has to run a business.
Leave the “sensitivity” to those car companies wasting taxpayer´s money.
Why SHOULD Toyota subsidize your new car purchase if it feels that it doesn’t have to? I can’t believe that we’re now at the point of calling a company “insensitive” for making a completely rational decision to protect its bottom line. This is business, not Kindergarten. Toyota has been astoundingly civil through all of this (I haven’t seen one negative ad or comment), especially when you consider that they could be twisting the knife around in circles until GM’s government green bled all over Detroit.
Pay back is a b1thch. USA wiped out Japanese indutry in WWII. American consumers return the favor in 2000s
Bertil Schmitt: Does anybody really believe that Germany and Japan were helped because of the kindness of the hearts of the Americans? They were helped for reasons of political expedience: There was someone called Stalin.
The Allies had also learned the lessons of World War I – namely, humiliating a defeated foe by stripping it of its resources and industry is not the way to lasting peace. A prosperous and democratic Germany and Japan would be much less likely to cause trouble in the postwar world. Which, of course, turned out to be true.
I can’t speak directly to Toyota’s practices, but I do have direct knowledge of the relationship pattern between major Japanese companies and their suppliers as it is applied here in the U.S.
A major Japanese company will work closely with the supplier, helping them with design, production, and quality problems. A good supplier can also get financial support (usually in terms of slightly higher prices or guarantees for a minimum level of orders for their components) to help them get through rough times. A bad supplier will be helped for a long period to improve their product, until the situation becomes hopeless. They won’t be usually ‘fired’ but will be subject to more and more QA and -if the parts don’t meet spec will have their parts rejected. Eventually the bad supplier will go out of business with a warehouse full of rejected parts.
The reason that the Major Company are willing to be so supportive is they are very selective in selecting their suppliers to begin with. They build a relationship
with the idea of profiting both companies. They won’t squeeze suppliers like GM will.
Thus I would expect that some suppliers who have done well for Toyota are receiving some sort of support or guarantees from Toytota to help them stay in business if the loss of GM business would endanger them.
It’s a teamwork approach to business rather than the -cut-your-mother-for-a-penny approach that GM has used with suppliers.
The Allies had also learned the lessons of World War I – namely, humiliating a defeated foe by stripping it of its resources and industry is not the way to lasting peace. A prosperous and democratic Germany and Japan would be much less likely to cause trouble in the postwar world. Which, of course, turned out to be true.
+1 to that.
It’s funny how these things turn into national pissing contests, when they shouldn’t and when the facts are obvious.
Here’s a metaphor that might help. An old lady needs help to get safely across a busy street; without the help, she’d probably get hit and die. A bystander jumps in to help her, not because he’s particularly kind hearted, but because he’s on the outs with his wife, who will be impressed (i.e. let him stop sleeping on the couch) if he acts like a mensch and helps Grandma to the other side.
Can the old lady claim that she didn’t benefit? No. This help made all the difference to her, even if the intent wasn’t entirely selfless. She doesn’t need to be a patsy, but she should be grateful for the help, because she got tremendous benefit from it and the person who helped her had no obligation to do so.
Can the guy claim to be an angel? No. He certainly helped, but had ulterior motives for helping. Those motives didn’t compromise the value of what he did, but his actions were also self serving in some way to a degree that she need not grovel or bake cookies for him every day for the rest of his life under the guise of his sainthood.
This is analogous to the post-WWII situation. Yes, we rebuilt them to help ourselves, but they still came out of it with the goods. Yes, we should stop bragging and pretending that we’re godly, but they should stop bitching and occasionally take a moment to thank us for helping them, because even if it did us some good, we didn’t need to be quite so nice about it.
The Allies had also learned the lessons of World War I – namely, humiliating a defeated foe by stripping it of its resources and industry is not the way to lasting peace
What a pity we haven’t applied that lesson in the middle-East.
toxicroach: “I think your reading too much into it. He has shareholders who have been getting told that a GM bankruptcy would destroy the suppliers and kill the whole industry. He has every right to reassure the public that Toyota will be ok.”
Well put and I agree.
Studying history can be educating.
Bertel, I have said it before and I will say it again…without the help of the US, it would have taken Germany 3 times as long to redevelop itself. Who cares if the US did it just for its own interests? Doesn’;t matter…..anyways, it’s water under the bridge.
So who’s to blame for the resurgence of Germany and Japan?
The heads of American industry, that’s who.