How Toyota Became 'America's Car'

Book Excerpt: Consumers Who Consider the Automaker a Local Company Are Missing One Key Point

By Published on .

Forty-seven years ago, I remember being glued to the set for the season debut of "Bonanza," the most popular show on TV, which back then garnered ratings numbers comparable to today's Super Bowl. This episode would be special, because not only would it be in full color for the first time, but Chevrolet, the show's sponsor since its inception, was withholding all commercial messages until the end of the program (a bold and unexpectedly dramatic move for those times). Instead, it would run a five-minute film on the entire lineup of all-new Chevrolets for 1960.
All-American? This assembly line above may be in Princeton, Ind., but Toyota's multibillion-dollar profits still go to Japan.
All-American? This assembly line above may be in Princeton, Ind., but Toyota's multibillion-dollar profits still go to Japan. Credit: Zbigniew Bzdak

Things were different back then. A Western about a widower and his three sons on the Ponderosa was the No. 1 TV show. Chevrolet was, far and away, the most popular car in America. It was truly one of America's "All-American" brands; an icon, along with Coca-Cola. And its theme, "See the USA in your Chevrolet," went on to become one of the most memorable and popular themes in automotive-advertising history. GM was on its way to flat out dominating the American market, and Chevrolet dominated almost every segment in which it competed, with a remarkable combination of style, performance and value no other car company could match.

But a lot has happened to America and its car market since then. The dawn of safety regulations came in 1966. Emission controls became a real factor in 1971. And the Japanese onslaught began in earnest in the early '70s as well. Today, the American automotive landscape is fundamentally altered.

The Japanese carmakers are part of the American automotive establishment. They build their cars here in factories all over the country, with American white-collar and blue-collar labor. The Europeans, led by the Germans, have taken broad swipes out of the performance and luxury segments in this country too. In 1979, GM controlled 48% of the domestic car market. In 2007, it's struggling to hang on to 25% of it. And the most glaring change? For all intents and purposes, Chevrolet has been usurped and replaced by Toyota in the hearts and minds of the American car-buying public. Toyota is everywhere, dominating in a wide range of segments.

Toyota has become ingrained in American society to the point that Americans working for Toyota, whether at its factories or dealerships, consider it an American company. And it's easy to see why, what with Toyota selling more vehicles in the U.S. than it does in Japan on a regular basis. A lot of people would even argue that it really doesn't matter anymore who owns Toyota, that it's a moot point and that nationalistic concerns should have nothing to do with it.

Add to this the fact that, to people in cities across the U.S., where Toyota is the reason they are able to feed their families, pay for their kids' education and make a comfortable living, it doesn't matter to them who Toyota really is in the global scheme of things, because to them it's a local company. It's involved in their local communities and it provides them with a comfortable standard of living. And if you look at it that way, they're absolutely right.

But I offer a different perspective.

Detroit to blame
And no, this will not be some maudlin, jingoistic "Buy American" diatribe. I'm certainly not going to dispute the fact that the American automobile companies brought their current predicament upon themselves -- because they absolutely did. They ignored the seriousness of the competition from their Japanese competitors for so long that by the time they woke up to the reality of what was happening, it was way too late.

The Japanese products were better, more reliable and -- before their inroads into the luxury market -- often cheaper than anything from the traditional Detroit automakers. And in most cases, this is still true today, because although the quality "gap" has grown smaller between domestic and import manufacturers, the fact that the Japanese can build their vehicles for far less cost means that the domestic manufacturers from Detroit will always be playing catch-up in a market that has no time for catch-up.

Every day of every week, Detroit auto executives face a daunting disadvantage against Toyota. Toyota's cost structure allows it to operate with a revenue-per-vehicle number that is as much as $6,000 per car better (depending on the vehicle) than that of the typical U.S. automaker. This is a result of Detroit's daunting health-care cost burden of $1,500 per car; its monumental legacy costs from thousands of retirees' pensions; and the oppressive union contracts negotiated in Detroit's last "heyday," which prevented the automakers from closing plants unless they paid the displaced workers 85% of their wages. Detroit's inability to cut costs enough prevents it from even remotely competing with the Japanese cost structure.

Add the Japanese government's orchestrated manipulation of the yen designed to benefit "Japan Inc." at every turn, and you have a laundry list of horrors for Detroit auto executives that are crushing in scope. But Detroit is culpable too. As a matter of fact, Detroit has hastened its slide to oblivion at every turn.

Irreparable harm
So really, it's not that hard to see why Toyota has supplanted Chevrolet as "America's car." GM's dismal mishandling of its passenger-car brands over the past 20 years has permanently damaged the one brand it absolutely couldn't afford to damage -- Chevrolet.
Read the rest: Peter M. De Lorenzo recounts the rise of Toyota in the U.S. in 'The United States of Toyota.'
Read the rest: Peter M. De Lorenzo recounts the rise of Toyota in the U.S. in 'The United States of Toyota.'

I saw for myself, while at Chevy's ad agency, how GM siphoned huge amounts of dollars away from Chevrolet marketing and advertising so it could prop up Saturn's remarkably average product lineup -- a lineup Chevy executives could not, or would not, for the life of them, figure out how to expand. I saw major Chevrolet product launches given a token amount of money almost as an afterthought, just so that Saturn could get one more enhanced promotional program under way.

And I was there to see Chevrolet's market share literally fall off the radar screen out in California (except for trucks) as Toyota basically became the "people's car" for a majority of consumers on the West Coast. GM's willful and intentional dismantling of Chevrolet has to be one of the most egregious mishandlings of a brand in automotive history. GM marketing blunders literally destroyed the quintessential American automobile franchise in less than 20 years.

But GM wasn't alone. The domestic manufacturers squandered their dominant position in the U.S. market en masse because they were consistently the highest-cost, lowest-quality producer in a game that the Japanese had single-handedly redefined to be as one of lowest cost, highest quality. And now we are well into the second generation of buyers who, thanks to the Toyotas of the world, have never owned a domestic brand of car or truck.

Winning hearts and minds
During this time, Toyota never wavered from its game plan. It slowly and methodically wove itself into the American economy. Complaints of taking American jobs away were met with an emphatic rejoinder -- it simply built plants here and hired American workers. And its suppliers built plants here too, and hired American workers. And it recruited local businesspeople to buy and run its dealerships. It sponsored motor sports and other sporting events on a national level. And it sponsored Little League teams on the local level. It sponsored the arts in cities across America and contributed to a wide range of charities and educational programs. It's done an absolutely superlative job of winning the hearts and minds of the American people.

It's no wonder people consider Toyota an "American" car company -- because for their money, and their communities, and their educational and cultural institutions, and their charities, Toyota, for all intents and purposes, is an American car company. As a matter of fact, no other car company -- Asian or German -- has so blatantly promoted itself as an American company. Yes, of course, Honda has been assembling motorcycles and cars in Ohio for nearly 30 years, but it hasn't gone as far as Toyota has in adopting an American persona. The same is true for BMW and Mercedes-Benz. They build cars here, and they participate in community affairs, too, but the lines never seem to blur between the origins of their company and their U.S. outposts.
Peter M. De Lorenzo is a national columnist who founded the influential and author of 'The United States of Toyota.'
Peter M. De Lorenzo is a national columnist who founded the influential and author of 'The United States of Toyota.'

But Toyota has always been a different story. Some of the most respected business leaders in communities all over America are Toyota dealers. Or work for a Toyota suppliers. Or sell Toyotas. Or work for Toyota directly. Roger Penske, for instance, owns the world's largest automobile dealer, Longo Toyota, in California. There are millionaires (and a few billionaires) all across America who have made their fortunes either directly or indirectly from Toyota. Look around you. People all over your local community drive a Toyota or Lexus and think nothing of it. Your friends, your neighbors and your co-workers.

To them, Toyota is more American than baseball, hot dogs, apple pie and Chevrolet. Hell, most people don't even remember when Chevy was any of that. Toyota has become an accepted part of the American fabric. It's just no big deal. After all, if Detroit can't compete, too bad and tough. It's a dog-eat-dog world, and only the strong survive, right? And why should I buy an American car when they're just not as good, right?

Washing of hands
Well, yes and no. On one level, that's certainly all true. Buy what you like. Like what you buy. And get the best quality for your money. If that happens to be a domestic brand, fine, but don't sweat it if it isn't. After all, Detroit is ultimately responsible for its predicament, and it's not my problem, right?

Maybe so, but let's not forget one key point.

Toyota may provide for comfortable livelihoods all across America. It may even be your own car or truck of choice. It might even have provided you with a scholarship to go to school. But after all is said and done, there is one simple reason why Toyota never has been and never will be an "American" car company:

Well, 13.2 billion reasons, actually.

Toyota earned $13.2 billion net profit in 2006. And where, exactly, did those profits go? It seems there's one very big thing that isn't American about Toyota, and that is where those profits go at the end of the day. To me, that makes Toyota a Japanese company, plain and simple. A company that is now inexorably woven into the fabric of this country, but a Japanese company nonetheless.
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