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Toyota Canada's new head lays out a recovery plan

A worker polishes a wall at the Toyota Scion exhibit in preparation for the 2012 North American International Auto Show in Detroit on Thursday, Jan. 5, 2012.

Jeff Kowalsky/Bloomberg/Jeff Kowalsky/Bloomberg

Toyota Canada Inc.'s new president has laid out an ambitious plan for reversing the company's slump, one that includes an aggressive sales goal that can be met only by winning back customers from rival auto makers.

In his first interview since his appointment last month, Seiji Ichii revealed that Japan's largest auto maker has set a target of selling 200,000 vehicles in Canada this year, which would be a jump of almost 25 per cent from 2011 and a dramatic turnaround from three straight annual sales declines.

Hitting that mark after last year's sales of 162,260 will not be easy, Mr. Ichii acknowledged Sunday. But he believes a flood of 18 new or redesigned Toyota, Lexus and Scion vehicles over the next 18 months will propel the auto maker back to a sales level that it hit each year from 2007 to 2009 as it rose to become the No. 2 seller of vehicles in Canada. Last year, it slipped to No. 4, behind the Detroit Three.

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"I don't think our targets should be easy ones," he said on the eve of the North American International Auto Show, which opens to the media in Detroit on Monday. "We don't know whether we can achieve that or not, but I want to keep challenging."

Mr. Ichii's comments highlight the challenge that faces all of the major auto companies in 2012: how to find growth in a market that is stagnant.

Canadian vehicle sales, which were 1.585 million last year, are expected to be up only a fraction in 2012 – at best -- as heavily-indebted consumers shy away from large purchases.

That means any sales gains will have to come at the expense of competitors. Companies like Ford Motor Co. and Hyundai Motor Co. have grabbed market share from Toyota in recent years and are seeking to hang on to those drivers and win new customers. Toyota also faces other Japan-based auto makers equally intent on boosting sales after major declines in 2011 because of a shortage of vehicles caused by the March 11 earthquake and tsunami.

The slow-growth environment has led to speculation that auto makers will increase incentives such as rebates and low-interest financing to snag customers. Mr. Ichii said he is surprised by how high consumer incentives are in Canada, noting that some auto makers are offering $7,000 or more in rebates.

Toyota will not boost incentives to meet the 200,000 target at any cost, Mr. Ichii said. "Crazy incentives is not what I have in mind."

Another ambitious, but longer-term, goal for Mr. Ichii is to see Toyota's Lexus division become the best-selling luxury brand in Canada. Lexus ranked fifth among luxury makers last year with sales of 13,364, which was less than half the 29,773 sold by leader BMW Canada Inc.

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Among the new or redesigned vehicles Mr. Ichii hopes will help reverse Toyota's decline are the subcompact Yaris, the mid-sized Camry sedan, new hybrid vehicles carrying the Prius badge and new cars for the youth-oriented Scion brand. Lexus will be helped by new vehicles as well, he said.

Mr. Ichii said Toyota's overall sales of 13,706 in December are the equivalent of a 200,000-vehicle year, when sales are adjusted for seasonality.

He also believes some customers have been waiting on the sidelines for tsunami-related vehicle shortages to ease, and are starting to buy now that dealers' lots are fully stocked again.

Such an attitude among consumers could provide an unexpected boost to Japanese auto makers and the entire Canadian market, industry analyst Dennis DesRosiers said in a note to clients last week.

"A lot of consumers sat on their hands last year as supply of Japanese products was very tight," Mr. DesRosiers wrote. "Even though Detroit vehicles are much better built and many are as good as any Japanese product in the market, it is very difficult to bring a consumer back into your fold once you have disappointed them not just once but maybe three, four, even five times."

Even before the supply shortages last year, however, Toyota had been in a tailspin in Canada since hitting a peak in 2008 with sales of 224,158 vehicles. The three years since that peak have been among the most difficult times the auto maker has faced since it began selling cars in Canada in 1964.

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The recession battered all companies in 2009. The next year, Toyota faced a recall crisis, during which it was savaged in the media and sustained damage to its reputation for leading the industry in vehicle quality, reliability and dependability.

Just as it was recovering from that crisis, the earthquake, tsunami and power crisis caused massive disruptions in parts supplies and caused shortages of most of its models last year.

In addition, flooding in Thailand disrupted supplies again last fall. Toyota and other Japan-based auto makers are also feeling the effects of the surging Japanese yen, which increases costs in their home market and reduces profits from exports.

Toyota Canada is cushioned from the much of the impact of the yen by the fact that about 50 per cent of the vehicles it sells in Canada are made at the company's two Canadian plants and another 30 per cent are imported from U.S. factories, Mr. Ichii said.

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