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Toyota's Car Buyers Are Satisfied With Everything But How They're Treated


DETROIT — Owen May thinks his 1993 Toyota Camry is the best car he has ever owned. So when the video producer from suburban Milwaukee went shopping for a new vehicle last spring, he was intent on buying another Toyota.

He settled on an RAV4 sport-utility vehicle, agreeing to pay $18,000 for a modestly equipped model--a five-speed stick-shift with a radio, air-conditioning and alarm system. He was told it would take four weeks for delivery.

Eight weeks later he was still waiting. The dealer then said he could not get the vehicle May wanted but would sell him an in-stock, fully-loaded RAV4 for $22,000. May left in a huff.

"They tried to bait-and-switch me," said the irate May, 51, who instead bought a Nissan Pathfinder.

The lost sale won't bring Toyota to its knees. After all, the company is on a roll. Its flagship Camry is the No. 1-selling car in the United States this year. Market share is increasing, and overall sales are up 7% over last year. It basks in a reputation as the most efficient, highest-quality auto maker.

But the incident in Milwaukee highlights an increasingly important area in which Toyota falls short and one that threatens future trouble. Consumers rate the auto maker and its 1,189 dealers well below average in the way they treat customers.

Even though they may love Toyota vehicles, many buyers detest what they have to go through to buy one. A recent survey by J.D. Power & Associates ranked Toyota near the bottom in consumer sales satisfaction.

In the past, such consumer sentiment had little consequence. Toyota vehicles were held in such high regard, and Detroit's quality was so suspect, that buyers willingly put up with Toyota's pushy dealers and subpar service.

"Toyota could afford to take their customers for granted," said Maynard Gordon, senior editor of Ward's Dealer Business.

No more. The quality gap with the Big Three and European makers has narrowed, and unhappy customers are quick to defect. Though sales remain strong, Toyota last year was able to retain only about 45% of its owners--a clear suggestion of trouble ahead. In contrast, Ford has a 64% loyalty rate.

Toyota is worried that unless it can keep more customers in the fold, growth in the all-important U.S. market could falter. The auto maker has set a U.S. sales target of 1.5 million vehicles by 2000, up from fewer than 1.1 million in 1996.

Much like Detroit-based auto makers began doing several years ago, Toyota is now trying to rein in its sharp-elbowed salespeople and pushing dealers to accept a more customer-coddling agenda. "We have to soften our approach," said David Illingworth, general manager of Toyota USA.

Ironically, Toyota's own Lexus luxury-car division helped set the standard for dealership quality. But as suggested by the J.D. Power rankings--which, except for Saturn, are dominated by luxury nameplates--it is easiest to coddle buyers of expensive cars, where volume is low and profit margins are high.

Toyota recently launched a wide-ranging effort to change its dealer, customer service and distribution operations. A 30-member team, headed by former Lexus consumer-satisfaction vice president Richard Chitty, is charged with revamping Toyota's sales process from start to finish.

"We are going to have to do some major transformations here," said Chitty, who expects the process to take at least two years.

Toyota's experimentation comes as the entire industry is searching for ways to streamline the sales, marketing and distribution process. Traditional dealerships are also facing new competition from new-car superstores that feature no-haggle, customer-friendly sales practices.

Toyota faces a difficult task, if for no other reason than its own success. It might not be excusable, but it's hardly surprising that dealers act cavalierly toward customers when they are queuing up to buy their vehicles.

Some practices that irritate consumers are deeply embedded in Toyota's corporate culture. Toyota operates as a high-volume, "turn-and-earn" company that rewards dealers that move the metal and withholds cars from those that don't. That leads to high-pressure sales tactics that can rankle buyers.

"They fill up the pipeline with vehicles and run them through the system any way they can," said Glenn Pincus, auto retail director for Coopers & Lybrand in Los Angeles. "Sales satisfaction is the price you pay."

Some dealers feel they are getting a bum rap. "I don't think we are as bad as the surveys say," said Murray Patkin, owner of Toyota of Watertown near Boston and head of the company's national dealer council.

He admits there are problem areas. A bigger complaint than high-pressure sales tactics, he said, is customers being unable to get cars equipped as they want or delivered in a timely fashion.

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