Trade-in value down; first-time buyers could be resistant
BY GREG GARDNER
FREE PRESS BUSINESS WRITER
Posted: Feb. 8, 2010Consumers say they have heard more negative news about Toyota in recent days than they heard about General Motors and Chrysler during their bankruptcies last spring, according to BrandIndex, a consumer survey that tracks perceptions of hundreds of companies.
"The challenge for Toyota is that 79% of the population is aware of the recall, and that is one of the highest levels in our experience," said Ted Marzilli, senior vice president of YouGov Polimetrix, which conducts the BrandIndex daily survey of 5,000 Americans.
Consumers report hearing and reading more f
avorable information about GM and Chrysler these days, Marzilli said, and Toyota, which consistently enjoyed the industry's strongest reputation before the crisis, likely will recover over six months or more.
Many Toyota dealers are working around the clock, offering free oil changes and other amenities to owners of millions of recalled vehicles. But with new issues arising and top U.S. executive Yoshi Inaba scheduled to testify Wednesday before the House Oversight and Government Reform Committee, the crisis hasn't ended.
"They're having a hard time getting this crisis behind them," Marzilli said. "It's too soon to know whether this is one of those potential turning points in an industry or the beginning of Toyota's complete recovery."
Rebuilding reputation won't be easyToday, Toyota is slated to resume production at five North American assembly plants where work stopped Jan. 26 while the Japanese automaker worked to resolve a gas pedal problem with eight popular car models, such as the Camry and Corolla.
And dealers have resumed sales on models that have had their gas pedals repaired.
But nearly universal awareness of Toyota's recall campaigns is expected to leave lingering questions about the automaker's reputation for quality for some time -- potentially benefiting Detroit automakers.
That will be underlined on Wednesday, when Toyota's top U.S. executive, Yoshi Inaba, is to testify before a Congressional committee about the automaker's problems, which include two U.S. recalls that cover 5.6 million vehicles.
Toyota is ranked as No. 8 in Business Week and Interbrand's rankings of the 100 best global brands. Toyota is the only automotive brand in the top 10 of that study, and the name was valued at $31.3 billion in 2009, down from $34.1 billion in 2008.
Toyota estimates the cost for its recalls and lost production and sales at nearly $2 billion, which experts say is low. But Toyota customers also will suffer as the value of their existing Toyota models declines, and it's unclear what the long-term impact on the Toyota brand might be.
Vulnerable to first-time buyersLast week, ALG, the auto industry arbiter of used vehicles' value, forecast a 5% decline in its "perceived quality index" for Toyota over the next three years. That will result in a small 1% decline in what a vehicle is worth at the end of a 36-month lease, but that estimate preceded news of U.S. and Japanese probes of brakes on the 2010 Prius.
"Toyota's situation needs to be remedied quickly and without future recalls," said Matt Traylen, ALG's chief economist. "If they do, then it should have minimal impact to perceived quality."
Edmunds.com analyst Joe Spina said dealers are offering as much as 10% less on recalled Toyota trade-ins, although he adds that dealers may sell those same vehicles for more in a few weeks if the recall goes smoothly.
Four out of five people -- 79% -- are aware of the automaker's crisis with accelerator pedals, brakes and reports of unintended acceleration, according to Marzilli. By comparison, in March 2009, the government's bailout of insurance giant AIG, the company whose collapse triggered the national economic crisis, was recognized by 77% of those surveyed. "It's hard to know what existing Toyota customers are thinking," Marzilli said, "but someone ou t there now shopping for a first vehicle will find it much easier to turn to another car company."
Toyota customers have been loyal, but the temporary production and sales suspension of eight models contributed to a 16% drop in its January sales from a year earlier.
"Their future sales to new buyers are very vulnerable now," said Rebecca Lindland, an industry analyst with IHS Global Insight.
Dealers and their service technicians are working long hours to repair gas pedals. Toyota said pedals on 2.3 million vehicles might stick in a partially engag ed position.
But Thursday's disclosure that U.S. and Japanese regulators are probing reported problems with brakes on Toyota's 2010 Prius hybrid, and another public apology in Japan by company president Akio Toyoda, kept the company in a media spotlight.
Learn from historyMarzilli said Toyota can learn from the experience of Southwest Airlines two years ago. Consumers consistently held Southw est in higher regard than its competitors. But in March 2008 the Federal Aviation Administration fined the Dallas-based airline $10.2 million for operating 46 airplanes without performing mandatory inspections for fuselage fatigue cracking. "That crisis lasted about five days and Southwest showed quickly it was able to make the necessary corrections," Marzilli said. "They recovered their previous levels of positive perception in five to six months."
One difference, however, is that travelers looking for low-price air fares, didn't have many other places to go.
Car buyers have many options.
Feb 5, 2010With every recall Toyota has announced, consumer perception of the heralded brand has taken a worse hit. Despite the PR campaign by Toyota's president & CEO Jim Lentz (pictured) addressing consumers, the automaker is still facing pretty stiff headwinds. Its buzz score dropped from the high 20’s to a score of -12.4 on Monday—well below the international carmakers sector average of 8.9, according to market research firm YouGov's BrandIndex report.
The Brandweek Buzz Report by YouGov is a weekly consumer perception report that analyzes the most talked about brands based on buzz: The scores are based on weighing positive and negative perceptions of a brand. A +100 score is positive, a -100 score is negative, and a rating of zero means that the score is neutral. This week's report also features scores based on quality and value.
YouGov interviews 5,000 people each weekday from a representative U.S. population sample. Respondents are drawn from an online panel of 1.5 million individuals.
The report spotlights:
• Beer brands
• Home entertainment brands
Toyota Drives Negative Buzz
Toyota outpaced its closest competitor Honda in buzz score throughout 2009 until October, shortly after its first recall. Since announcing two safety recalls on some of its models, Toyota's buzz score has taken a hit with adults over 18 (beginning Jan. 26). So far, CEO Lentz has appeared on NBC's Today show and ABC News, issued a public video apology, and took out full-page ads in major newspapers. The brand has long been highly perceived by consumers. Even over the past several months—as Toyota has announced additional issues—the brand has seen dips, but has bounced back (or at least started to bounce back each time). But with each new recall, the valleys get a little deeper and the recovery becomes a little slower. Toyota's consumer perception is now lower than that of the Hummer.
Battle of the Beer Brands
Clydesdales or no Clydedales in this year’s Super Bowl ad campaign? This burning question has been posed on Facebook by Budweiser, keeping the beer brand’s buzz score elevated above its rivals heading into Super Bowl Sunday (on Feb. 7). Budweiser, which on Thursday confirmed that Clydesdales will trot into the Big Game after all, currently holds a buzz score of 19. Bud is counting on the Facebook population over 21 to win new fans, while ditching its yearlong “Drinkability” slogan to premiere “Here we go.” Although not a Super Bowl advertiser, Coors has improved buzz since mid-December on the crest of its heavily promoted 44-day sweepstakes tied to the event. Inviting fans to text in entry codes from bottles of Coors Banquet or Coors Lite, the brand doubled its score in the past 45 days from 6 to 12. Miller, lagging behind with score of 8, is buying up local time during commercial breaks to continue its Miller High Life is for the “average guy” theme. This time, Miller is focusing on small businesses like Tim’s Baseball Card Shop in Chicago.
Sony Leads Home Entertainment
There may be over 80,000 people inside Sun Life Stadium in Miami this Sunday, but the global audience will be watching on televisions at homes and venues around the world. January’s run-up to the Super Bowl has been a key time for retailers to promote discounted prices on big-screen TVs. In the world of home entertainment, for men over 18, there is Sony and then there is everybody else. The bubble chart (below) measures both quality and value scores over the last four weeks for the major home entertainment brands. Sony distinguishes itself from the pack—a tough task to achieve among this set of highly perceived competitors. Samsung and Panasonic are neck and neck. LG and Pioneer flank the sector average, while most of the other brands bunch very close together with respectable positive scores in the mid-20’s.