Thursday, December 8, 2011

Toyota Considers Making More Lexus Cars in North America

Lexus-gs-0
The forces of nature aren’t the only ones conspiring against Japanese carmakers, and Toyota in particular, this year. The strong yen, which in the past six months alone has risen by 9% compared to the U.S. dollar, is seriously hurting Toyota's profitability.

Pushing its suppliers hard to minimize their costs, or finding alternative partners, is one of the measures taken by the biggest Japanese carmaker. Moving more of its production out of Japan to more cost-efficient plants in other countries is t.

The weak dollar is making manufacturing in the U.S. increasingly more attractive, allowing for more competitive prices and higher profit margin – to the point that U.S.-made Camrys will be exported to South Korea.

However, Toyota’s luxury division, Lexus, is another story altogether: all Lexus models, sans the RX that is made in Canada, are built exclusively in Japan. With the U.S. being the brand’s main market, though, it makes sense for Lexus to follow its German competitors’ example (i.e. BMW and Mercedes-Benz) and move more of its production to the other side of the Pacific.

"I'm sitting on the fence", Mark Templin, head of the Lexus brand in the U.S. told CNN Money. "This is a complex decision that would come from Japan. But we could build more Lexuses here."

Templin admits that even though it makes sense from an economic point of view, manufacturing its most prestigious models at home is also a matter of “pride” for Toyota.

Due to the dollar-yen exchange rate, building cars in its existing North American plants instead of importing them from Japan would instantly raise Toyota’s profits and reduce delivery times to customers.

Toyota’s CEO, Akio Toyoda, has already announced that he expects a 5% operating profit this year. This is lower than its historical average, and half the 10% operating profit it recorded in 2004.

With Lexus having already lost valuable time, and sales, Templin thinks that U.S. Lexus dealers have to increase customer satisfaction beyond the upscale waiting rooms, loaner cars, latte bars and flat-screen TVs that have already been copied by competitors. Though he didn’t specify what actions they should take, he did leave a hint: "I will tell you this: the most valuable thing in the lives of our customers is their time."

 

 

Courtesy of CarScoop

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