Toyota bracing for backlash

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February 14, 2007|By Detroit Free Press

DETROIT -- Toyota Motor Corp. is bracing for possible political and consumer backlash caused by its rapid U.S. growth, according to an internal report obtained by the Detroit Free Press.

Toyota executives have publicly downplayed the importance of predictions that the Japan-based company will pass General Motors Corp. this year as the world's largest automaker. But the Toyota report says the company could face criticism because its U.S. sales are increasing while Detroit's automakers are losing sales and closing plants.

"With recent market-share gains and sales continuing to increase, we are becoming the de facto leader of the industry - that brings risks and responsibilities," according to a presentation by Seiichi (Sean) Sudo, president of Toyota Engineering & Manufacturing in North America. "Our competitors are jealous of our success."

Detroit's congressional allies of GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group say it's not jealousy. They say Japanese automakers are exploiting an artificially weak yen to make their products more affordable.

U.S. Rep. Sander M. Levin, a Michigan Democrat, said he is considering new legislation aimed at pressuring Japan and other countries to stop manipulating their currencies to boost exports.

Japanese automakers "are importing the more expensive cars to the U.S., and getting the benefit of the yen imbalance," Levin said. Japan has "a clear-cut set of policies, and we don't have any."

In the briefing to other Toyota managers, Sudo noted political and social risks under the heading of "external challenge." The report, left unsecured on computers at the company's Georgetown, Ky., complex, said Toyota could come under fire for:

Selling vehicles to U.S. customers with high proportions of foreign-made parts. Less than half of the content of Toyota vehicles sold in the United States is made in the United States or Canada.

Not including enough minority-owned businesses in its supplier base. The Rev. Jesse Jackson, leader of the Rainbow PUSH activist group, has asked Toyota to improve diversity efforts.

Leaving a vacuum in U.S. communities as GM, Ford, Chrysler and their suppliers shed plants and workers.

"A Democratic Congress, particularly those members with districts hit by Big 3 and supplier plant closings, may call for further oversight of the industry and Japanese companies in particular," Sudo's presentation said.

Toyota's concerns are not far off the mark. With a new Democratic majority in Congress, Michigan's Democratic lawmakers have pledged to press harder on trade and other issues where Detroit automakers say Japanese companies have an unfair advantage.

Last week, two Democratic House members from Michigan - Levin and Rep. John D. Dingell - sent a letter to Treasury Secretary Henry Paulson, urging him to press Japan over the value of the yen during a meeting of world economic powers.

Dingell, Levin and two other congressmen said in their letter to Paulson that a weak yen had helped Japanese automakers increase their imports by more than 30 percent in 2006. Detroit automakers and their congressional allies say the yen bestows up to a $4,000-per-vehicle benefit for Japanese automakers.

The Harbour-Felax Group, a Royal Oak, Mich., automotive consulting firm, estimated the yen benefit at $1,054 per vehicle in a study it released last fall.

"It is a little-understood fact that Toyota's exports to the United States are almost as great as the number of vehicles produced in the United States by Toyota," the lawmakers wrote. "We are certain that the weak yen is also boosting Japanese exports in other economic sectors and is having a significant impact on many U.S. producers."

Toyota's public image and ability to operate with few barriers in the United States are significant, because this is the world's biggest market and a source of huge and profitable growth for the automaker. Its U.S. sales rose 12.5 percent last year, and it is expected to have $13 billion in profit this fiscal year.

Toyota passed Ford and the Chrysler Group in global vehicle sales and could pass GM, thanks, in large part, to its ability to beat Detroit on its home turf. The Camry has been the best-selling car in the United States in nine of the past 10 years, and Toyota's U.S. market share has doubled since 1996.

Toyota would not comment about Sudo's presentation except to say it was a five-year planning document that looks at challenges the company faces. The Free Press reported last week that the report also contained information about Toyota's plans to hold down increases in U.S. labor costs and its worries about maintaining quality in the wake of several recent recalls.

Toyota officials have said the possibility that their company would pass GM as the world's largest automaker is irrelevant to them and to consumers.

Sudo's presentation, though, shows that Toyota sees a potential downside, especially in light of U.S. automakers' financial difficulties.

"Toyota will be a `scapegoat,'" one slide says.

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