Toyota’s been pulling its punches in the U.S. market for years– to avoid the political backlash and lowered profits that a Chrysler, Ford and GM’s collapse would create. Surveying the damage left by a 32 percent drop in September sales, ToMoCo is now saying fuck that shit [paraphrasing]. “The ‘Saved by Zero’ ad campaign began Oct. 2,” Automotive News [sub] reports. “It promotes a 0 percent financing program on 11 vehicles. Dealers say Toyota will shell out at least $250 million this month to cover the cost of the subsidized loans and to fill the airwaves with commercials. Calling it ‘mind-boggling,’ one dealer who asked not to be named said he doesn’t believe Toyota has ever spent so much in a single month on incentives and advertising.'” [That’s what passes for independent, authoritative sources these days.] As one of only two AAA-rated auto lenders (GE Capital is the other) left in the biz, Toyota Financial can do what its competition can’t. And even though U.S. consumer confidence has hit the skids, whatever’s left will soon be headed ToMoCo’s way. In other words, the Japanese automaker is about to eat the lunch AND dinner of the aforementioned domestics.

Most Americans don’t know this, but Volkswagen has too many brands. Volkswagen, Audi, Seat, Skoda, Bugatti, Bentley, and Lamborghini. Bugatti, Bentley, and Lamborghini are in their own category. In the mainstream though, VW has four brands competing with each other throughout the European markets. They subsist somehow for three reasons. (1) While the bulk of Audi’s sales come from 4-cylinder A3s and A4s, they are a player in the luxury market. (2) Because of regional favoritism (i.e. the Spanish buy Seats because it was once a Spanish company). (3) Pricing and brand stigma. VWs are more expensive, but a respectable car brand. Seats are unusual outside of Spain and Italy, are priced cheaper than VWs, and tend toward weak interiors. Skodas are still the butt of jokes from when the company cranked out stereotypical Eastern European cars. All good? No. The model isn’t working. Spain’s economy, which has been seriously hurting ever since 1588 they went on the Euro, is getting slammed even worse right now. Sales across Europe are down, and Spain is taking it very hard. “I don’t think the Spanish market will recover, given everything that’s happening,” Seat President Erich Schmitt told Spain’s Expansion newspaper. While Automotive News Europe says VW has no plans to close or sell Seat – down 22% this year – that’s what they always say. Until they close or sell it. TTAC won’t be chronicling this story in close detail, but Seat is on European deathwatch.

Perhaps Toyota Sales Chief Jim Lentz would like to type the words “credit crisis cars” into his Google bar. Because Jimbo doesn’t think that credit’s the main problem with a U.S. new car market that’s pretty much stopped dead in its tracks. “The vast majority of our customers are able to get approved for loans,” Jim Lentz told The Detroit News after cutting the ribbon on the ToMoCo’s new research-and-development center in Michigan. “In our case, credit is not the biggest challenge. Our biggest challenge is consumer confidence.” Ah, in our case. You know, for the automaker who could STILL buy BOTH Ford AND GM with their projected 2008 profits. That said, Lentz isn’t the only one who says you want a loan? We got loans! “‘There’s no issue at all with above-average credit,’ said Alan Helfman, owner of River Oaks Chrysler Jeep in Houston, adding that he is also still doing deals for customers with bad credit, albeit fewer than he was a year ago. ‘Hurricane Ike was a bigger problem for us than the credit crisis.'” You ain’t seen nothin’ yet Al. Or, if you have, you better get used to it. Just sayin’

Automotive News [sub] reports Toyota’s profits are set to slide 40 percent when the firm announces its annual numbers. At issue: exposure to weak American sales and a slowdown in China. And though reaping just over half its expected profits sounds like bad news, ToMoCo will still pull down $12.8b this year. Needless to say, that’s a mighty impressive accomplishment for a firm that’s so dependent on flagging US sales. Koichi Ogawa, chief portfolio manager at Daiwa Asset Management, says Toyota is still on solid ground. “Given that the price of fuel and some raw materials is falling, earnings in the auto sector are likely to start to recover in six months to a year. This could be a good buying opportunity for long-term investors.” A quick look at Toyota stock shows it’s fallen steadily from its longtime high of $137/share in February of 2007. It’s still dropping, currently trading at about $65. Still… with a rock-solid 6.5 price-to-earnings ratio, and a portfolio that includes massive investments in hybrid and electric technology, Toyota is no GM or Ford. No siree.

With the economic downturn, recession, depression, or whatever you want to call it, we already know that new car sales are taking a long vacation from existence. And cars like the Ferraris and Alfa 8Cs of the world shouldn’t have too much trouble selling, since there are still millions of millionaires. But how about the muscle cars? By and large, the boom in muscle car prices was the result of nostalgic shoppers, laying out significant – but not exorbitant – sums for the dreamcars of their youths. We’re talking about people that had been buying and selling drivable muscle cars in the $20k to $50k range, not just the Barret-Jackson shopping insanity. With financial “gurus” like Jim Cramer telling punters to cash-out all their investments, we can expect a glut of reasonable condition cars on the market, as folks look to pick up more money before the storm. And then consider that in the context of a hugely reduced buyers’ market: how many people are looking for five-figure toys these days? I’m far from an expert, but I’d guess we will see something on the order of a 60 percent drop in the market values of cars like Camaros, Mustangs, Chevelles, and Pontiacs. The rarer and collectible models will no doubt fare better, as these tend to go to buyers that do more polishing and less driving (if ever). While some sellers may decide to hang on to their cars because there are so few buyers, there will still be plenty of cars on the market. It’s a buyer’s opportunity, no doubt about that. If, like me, you’ve ever just wanted an AMC AMX in the driveway, the next few years might be the time, should you be employed.

The financial conflagration which started in the US has spread around the world. Bloomberg tells us that in the UK “despite an easing in prices at the gas pump, sales of new cars in September tumbled, falling 21.2% from the same month a year ago. That was even worse than August, when sales were down 18.6%.” Porsches are apparently the SUV’s twin sister over there with a 33.3% sales plunge. But apparently the UK‘s art market is strong: “Stuart McCullough, board member for sales and marketing at Bentley said in an interview last week that some customers were putting off delivery because they didn’t want to make such a lavish and visible purchase when many consumers faced tougher times. ‘We are seeing buyers not taking delivery of our cars, but continuing to invest in the art market’, he said.” You do have to wonder how Sir Stuart knows this. Do his customers invite him into their homes for private showings of their art? Perhaps he will find a still hot selling Smart Car mounted on a pedestal as an object d’ art.

The Detroit Free Press’ Mark Phelan is one of Motown’s most reliable cheerleaders. So it was no surprise when Phelan gushed all over the new Ford Flex back in August. “The 300,000-plus people who used to buy Ford Explorer SUVs every year are the group who will decide whether the Flex experiment pays off. If 80,000 to 120,000 of them year plunk down $35K or more for the Flex, Ford’s future immediately starts to look brighter.” Notice the if? Ah, but then… “It should.” Anyway, big whoop. Phelan does this shit for a living. But why did fellow Freep Sarah Webster shiv Phelan in this morning’s paper? “Boxy Ford Flex isn’t selling as expected in brutal market” is the most ambivalent mea culpa I’ve ever encountered (other than Richard Nixon’s remarks to David Frost). Phelan’s fellow scribe starts by cataloguing the carnage. “Earlier this year, {Ford marketing maven Jim] Farley said Ford hoped to sell between 70,000 and 100,000 of the Flex crossovers annually. At its current selling rate, though, Ford would sell about 24,000 a year.” Then she recaps Phelan’s positive review, and other positive reviews, and customers’ positive reviews. So what gives? Bad marketing! Cue Farley’s black-is-white PR thing: “Farley said the market conditions are so bad that it’s tough to tell how the Flex would be selling otherwise. Putting aside the lower-than-expected sales volume, Farley said the Flex has actually been a success.” In other words, the operation’s a success but the patient’s dead. Focus people! Focus!

Obviously, TTAC has no problem with car manufacturers targeting gays, lesbians, bi-sexuals, transsexuals or herbisexuals for any given brand or model. But we do expect carmakers to do so with a modicum of common sense. Pitching the new Chevy Traverse at gay men is like suggesting that Barack Obama should show up at his rallies in a Maybach Exelero. Hang on. Cool! OK, it’s like suggesting that soccer Moms should buy a Pontiac Solstice. Actually, they should– just to get away from the kids for a few hours. And keep Alzheimer’s at bay by trying to erect the Solstice’s top. Is that sexist? Damn! Alright, try it this way. GM’s marketing mavens should know that the Chevy Traverse is to the Mazda Miata what Chuck E. Cheese is to Fire Island. Or something like that.

Up to September, Toyota was weathering the new sales storm with relative grace. Sales volume has been dropping, but market share never declined the way it did last month. To stop the bleeding, ToMoCo is announcing a zero-percent interest promotion, hoping to lure in showroom traffic in a tight credit market. Of course luring in traffic and offering truly great deals aren’t one and the same. Toyota’s most popular and fuel-efficient cars are conspicuously absent from the list of qualifying nameplates, which includes Matrix, Corolla, Camry, RAV4, Highlander, FJ Cruiser, 4Runner, Sequoia, Sienna, Tacoma and Tundra. Further limiting the impact of this promotion is the increasing rarity of “well-qualified buyers.” Automotive News (sub) says one reason Toyota is reaching for incentives is the relative success of GM’s “Employee Pricing For All” deal, which is credited with helping the General regain ground against Toyota in September. Ultimately, Toyota may be the only automaker with the financial resources to offer low interest deals on so many vehicles, including the compact Corolla and Matrix. “And at the end of the day,” says Christopher Richter, an auto analyst with CLSA Asia-Pacific Markets “I don’t think the costs to Toyota will be that great.” There’s no doubt that showroom traffic should increase, and even if sales don’t pick up dramatically, the offer places a foot on the throats of Toyota’s value-positioned American competitors. Stay tuned for more details when October sales numbers come out.

Back when there still was a real estate market, the San Francisco Bay area was one of the hottest. Los Gatos’ auto row included several venerable multi-generation family operations. Last year Swanson Ford gave up the ghost. Last week, Los Gatos Chevrolet hung up its spurs. Now lonely Moore Buick-Pontiac-GMC finds itself the sole survivor, stuck between the carcasses of Swanson on one side and Los Gatos Chevrolet on the other. According to the The San Jose Mercury News (SJMN), “Perhaps a dozen San Jose-area dealerships have closed in the past few years, including Silicon Valley Hummer, Stevens Creek Buick-Pontiac-GMC, Sunnyvale Dodge-Chrysler-Jeep and Sunnyvale Lincoln-Mercury this year. Smythe Volvo closed a location on Capitol Expressway Auto Mall, but remains open on Stevens Creek Boulevard.” Paul Melville of Grant Thornton LLP sums up the nationwide situation: “‘An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines… In addition, the domestic automakers who badly need retail consolidation are not spending much of their scarce capital on the problem because the economy is doing it for them.'” Even so, the dealer networks are not yet shrinking as fast as retail sales are falling. Carmageddon indeed.

Rest easy America, your government has appropriated $700b of your malaise-busting tax dollars to fix the economy… and fatten up a few pet projects. As Farago reports, auto loans were bundled into the “distressed assets” category, but that’s not the only handout the industry received just days after the passage of its own special bailout. The Detroit News reports that hidden away in the 451 pages of the “Extreme Bailout: Wall Street Edition” is nearly a billion dollars worth of consumer credits to buyers of plug-in hybrid electric vehicles (PHEVs). We’ve always preferred consumer-end stimulus to the production subsidies awarded last week, but apparently Detroit gets to have its pork and eat it too. And like the retooling loans, the tax credit seems tailor-made for Detroit. Under new rules, any PHEV with at least 4kw battery capacity would qualify for $4,168 credit, but (thanks to its serial-hybrid setup) the Volt’s high-capacity battery would make it qualify for the top passenger vehicle tax break of $7,500. Larger credits exist for vehicles over 10k pounds, but all credits expire after 250k qualifying units are built. With $7,500 off the top, state and federal production subsidies, and more hype than a David Blaine special, the Volt had better amount to something… other than a boondoggle.

If that’s true, if federal bailout billions can’t regrease the palms wheels of the American auto industry, this sucker will grind to a halt before that most magical of years, 2010. I mean, is Big Al for real? Can Ford really have enough cash money to weather that kind of downturn– which is, let’s remember, getting worse. “The downturn is longer and deeper than we foresaw a year ago,” Mulally admitted to Automotive News [sub]. But Ford “had the liquidity to deal with it.” HAD? Mulally told AN that The Blue Oval Boyz have “a good small car collection that would give it a global product line-up to cater to the various markets, in the United States, Europe and Asia, where customers now were asking for these vehicles.” GOOD? WOULD? I know Mulally’s a low-key kinda guy. But I reckon Ford’s catastrophic U.S. market share/sales slide and European cutbacks (a 10 to 15 percent production reduction for starters) require a more Churchillian response. “Continuous effort – not strength or intelligence – is the key to unlocking our potential.” Uh, maybe not… Anyway, speaking to The Wall Street Journal, Mulally ruled out a Chapter 11 filing. Or is that “positioned himself in a non-bankruptcy-related context?” Exact words: “Bankruptcy “is not in our consideration.”

Terminating Caddy’s XLR SL fighter is a no brainer. The brand shifted just 83 of the two-door drop-tops in September (vs. 111 last year), bringing the year’s total to… 1039. While that’s only 4961 units away from Caddy’s annual sales goal for it’s over-priced, under-developed sports car, Left Lane News (LLN) quotes “inside sources” who say the model will be killed off “in a few year’s time.” The XLR is based on the ‘Vette, due for a 2012 re-do. “Not long ago, we flatly asked GM Vice Chairman Bob Lutz, ‘when the new C7 Corvette arrives, will the Cadillac XLR be along for the ride?’ ‘That is way too specific,” said Lutz.” Yeah, lay off, will you?

Dow Jones’ Kathy Shwiff really should read her colleagues’ work. The lead of Schwiff’s morning-after mop-up of September’s auto sales debacle remains oblivious to Sharon Terlep’s conclusion that fleet sales saved GM from a total rout. “The heightening of the credit crunch at the end of the month saw showroom traffic tumble for a number of auto makers, but General Motors Corp.’s (GM) sales decline – half that of rivals Ford Motor Co. (F) and Toyota Motor Corp. ( TM) – showed that the right incentives can work. GM’s results were boosted in late August and last month by the return of an old standby – employee pricing. That helped the auto maker’s sales fall 16%, a less severe decline than many analysts expected.” Speaking of that Ford drop, FoMoCo sales analyst George Pipas got his freak on. I mean, freaked out. George said September sales levels and showroom traffic were “tantamount to a natural disaster” or the days after the Sept. 11, 2001, terrorist attacks. Surprisingly, then, FoMoCo doesn’t share GM CEO Rick Wagoner’s bailout boosterism. “Ford economist Ellen Hughes-Cromwick noted the recent freeze in the short-term credit market affects businesses more than consumers, but marketing chief Jim Farley said he has seen lenders require higher down payments because they want to see more ‘commitment’ from buyers.” Uh, doesn’t Ford Motor Credit handle that stuff?