Toyota Takes Aim at Bad Dealers

Program to fix “horrendous” dealer process.
by Paul A. Eisenstein (2007-06-22)


When a power window motor on Robert Glenn's Camry went bad, the suburban Los Angeles writer expected to spend a couple hundred dollars on repairs, but when he called the dealer he'd been using for 20 years, the price came in at twice that amount. Frustrated, Glenn called another dealer, closer to his office, who said he'd do the work for half price. So Glenn switched shops asking his new dealer to do an oil change, too.

The next day, however, the bill came to…$400. Instead of a regular, $30 oil change, Glenn was charged $168 in labor alone for a "power oil flush." Now, clearly angry, the father of two called Toyota's factory representative, who admitted there's no such thing as a power oil flush, but who declined to push the dealer for a refund.

After owning six Camry sedans over the last two decades, Glenn is suddenly getting interested in the new Honda Accord coming out this autumn, and he's not alone. While Toyota has some of the highest loyalty rates in the U.S. auto market, according to industry statistics, data also reveal a growing frustration with the automaker's sales and service process, a trend that could lead to a loss of the long-time Toyota customers the company needs to maintain the fast-paced growth it's experiencing in the U.S. market.

As a result, Toyota is readying an expansive plan to dramatically improve the entire "experience" of buying, owning and maintaining one of the company's products, TheCarConnection.com has learned.

"It's a movement, not a program," explained Jack Hollis, the corporate manager with Toyota's U.S. sales subsidiary who was put in charge of developing EM2, or Everything Matters Exponentially. "The company is trying to address the entire sales and service experience (because) if we really want to keep growing, we have to do it by increasing customer loyalty."

The program or, if you prefer, movement, comes at a critical time. Toyota is undergoing phenomenal growth all over the world, but no market is more important than the affluent U.S., where the company is now routinely nudging ahead of Detroit's number two maker, Ford.

But even as the sales number climb, there are problems that could backfire on the company, starting with a variety of well-publicized recalls that resulted in more cars being called back for service last year than Toyota sold in the States. And another recall, this time of the important, new Tundra pickup, is looming, due to a defective V-8. Tellingly, the automaker tumbled in the latest J.D. Power Initial Quality Survey, released earlier this month, slipping behind Honda, now the mainstream brand with the lowest level of "problems" right out of the plant.

Perhaps more significant, Toyota has slipped not only in these "things-gone-wrong" surveys, but also in studies measuring "things-gone-right," the things a maker can do to surprise and delight a customer. In the latest Vehicle Satisfaction Awards, from the California research firm, AutoPacific Inc., which measures things both wrong and right, didn't even measure up to industry average, falling behind not only TGW leaders like Honda and Cadillac, but brands such as Volkswagen, Land Rover and Hummer, which have traditionally suffered from weak quality.

"Their sales and service are the pits, absolutely horrendous" echoes CNW's Art Spinella, who conducted an extensive survey of U.S. auto buyers, for the Japanese business magazine, Diamond Weekly. That poll placed Toyota fifth in customer satisfaction, behind not only Honda and Nissan, but also BMW and General Motors.

Though Toyota officials downplay the series of recent poll results, they readily acknowledge they've got work to do. "I would argue that we're not doing well," contended Hollis, losing as many as four out of ten existing customers to competitive brands. In the past, conquests, or first-time buyers, have fueled Toyota's steady growth, but long-term, those numbers will slow and the automaker needs to make sure it keeps those customers it has, Toyota believes.

And that's where EM2 comes in. By "holding up a mirror," Hollis told TheCarConnection that a team of "all starts," from each of Toyota's corporate departments, has been looking at every aspect of the customer experience, including the basic sales process, service and the way both customers and dealers interact with the factory. Dealers have also been asked to look at their processes to see what works and what doesn't.

Several steps have already been outlined. For one thing, a sizable number of corporate employees will be shifted from Toyota headquarters, in suburban Los Angeles, out into the field, where they'll be closer to the customer, and given more leeway to resolve problems, such as L.A. writer Glenn faced.

The 13 dealers on Toyota's regional and national dealer councils have weighed in with a list of suggestions. Hollis declined to discuss specifics, but it appears the company will use a carrot-and-stick approach, using financial and other rewards to encourage the best behavior, while discouraging the sort of heavy-handed sales and service tactics studies show consumers hate.

Company representatives spent hours studying the minutiae of operations at an Atlanta showroom operated by the mega-retailer, Group One Automotive. "Normally, we wouldn't let them do it," acknowledged Group One CEO Earl Hesterberg, but he agreed with the factory's contention that "their customer satisfaction scores are commensurate with the quality of their vehicles."

Hesterberg has mixed feelings about the changes proposed under EM2, cautioning that dealers alone aren't the problem, and that they alone can't fix things. "It's a high-pressure dealer network,." The former Ford executive emphasized, and Toyota itself will have to accept that a more friendly sales process may not win as many conquest customers.

Corporate officials say they're aware of the trade-offs. There "won't be any magical answers," Hollis acknowledged, but as EM2 rolls out, over the coming years, he said Toyota is hoping that it will achieve "a whole new customer experience level" that will pay off in the long-run.

But even as the sales number climb, there are problems that could backfire on the company, starting with a variety of well-publicized recalls that resulted in more cars being called back for service last year than Toyota sold in the States. And another recall, this time of the important, new Tundra pickup, is looming, due to a defective V-8. Tellingly, the automaker tumbled in the latest J.D. Power Initial Quality Survey, released earlier this month, slipping behind Honda, now the mainstream brand with the lowest level of "problems" right out of the plant.