Tundra Sales "Picking Up"

Much ink has been spilled over the past few months about the Toyota Tundra, which is Toyota's first true competitor to the full size pickup offerings from GM, Ford, and Chrysler in terms of size, capability, and power. (Previous Tundras were about 7/8 the size of the domestic trucks).

The initial launch of the truck did not go well. In fact, Toyota's problems began before a single truck rolled off the line, when construction costs for the new factory that Toyota built in San Antonio, Texas for the Tundra went significantly over budget. The product mix was not appropriate at launch - there were too many lightly-equipped regular cabs and not enough loaded CrewMax four doors. Next, there were a handful of highly publicized camshaft failures in the truck's new flagship 5.7 liter V8 engine, and Toyota had to resort to un-Toyota-like generous incentives to give the truck a sales boost.

Well, the incentives must have worked.

When comparing current Tundra sales against its former, smaller self, only the first two months of 2007 were lower than their comparable periods in 2006. Then, starting in March, Tundra sales exploded, and were up over 120% (i.e., more than double) in May, June, and July compared to the same period in 2006. In fact, if Toyota sells just 18,518 Tundras in August 2008 (it sold 23,150 in July), it will have already matched its total sales for 2006. Through the first seven months of 2007, Toyota has sold an average of 15,141 Tundras per month; extrapolating that through December 31, and Toyota is on pace to sell 181,692 trucks, which is almost 46% more than it did in 2006 (but short of its sales goal of 200,000 trucks in its first year). However, if Toyota can sell July's total of 23,150 trucks per month for the rest of 2007, it will have sold 221,740, and blown away its goal. I don't see any signs of the juggernaut slowing down; sales have increased in each month the truck has been on sale, so meeting their goals - which seemed laughable in the truck's first few months - seems almost inevitable now.

Against its competition, the Tundra's sales are even more impressive. The full size pickup segment is down 4.7% so far in 2007, and every competitor is showing negative sales year to date but Toyota, which is up 56.5%. It's a tough market in which to sell a full size V8 powered pickup with the housing market slowing down and high gas prices, which makes this feat even more impressive. So, whose lunch is the Tundra eating, if its sales are way up in a falling segment?

GM Vice Chairman of Global Product Development Bob Lutz, when asked about the Tundra's likely impact on the domestic pickup market several months ago, speculated that the Nissan Titan would bear the brunt of any sales increase from the Tundra. It turns out that so far, he was partially right; year to date Titan sales are down 12.9%, which is the worst drop among competitors. The Ford F-series is down 12.2%, while the GMC Sierra and Chevy Silverado cousins are down a combined 6.9% so far. The Dodge Ram, in spite of a truck about to be redesigned, is the only competitor whose sales dropped slower than the segment's sales.

Another angle to compare might be the market share that each truck has. The biggest gainer in market share (comparing 2007 market share through July 31 against 2006 market share through December 31) was Toyota, going from 5.6% to 8.5% (up 2.9 percentage points). The biggest loser in market share during the same period was Ford, going from 36.1% to 33.1% (down 3.0 percentage points). In other words, almost all of the Tundra's sales gain has come at the expense of the Ford F-series. Time will tell if this is only a temporary phenomenon, as an all-new F-150 is due for the 2009 model year, but half of the F-series lineup (the Super Duty F-250 and F-350) were recently re-done as early 2008 models, and the new Super Duties aren't propping up F-series sales enough to offset the Tundra's gains.

This all means that the Tundra is doing what it is supposed to do for Toyota - building market share, generating cash and profits, and further weakening the domestic competition - all in the face of a GM product that is superior in many ways. The Tundra's success makes the previous strategy of just ceding the car market to the imports in the 1980s and 1990s in favor of trucks look even more foolish than it already did. Now buyers who are satisfied with their Camry or Corolla who need a work truck are thinking, "well, my sedan has been a good car, so the Tundra will probably be a good truck."

GM 'Tactically Targets' Their Customers- 0% Financing On Trucks

On July 9th, we read this-

GM sales manager Paul Ballew said last week that the auto maker would evaluate its discounts on trucks after a down June and competitors "flailing away" on incentive spending. Toyota was offering 0% financing for 60 months or more than $3,000 in discounts on its new Tundra pickup truck.

Despite the adjustment, GM said it will stick to its incentive strategy and use targeted, tactical deals.

Now, just 2 weeks later, it looks like GM is on the verge of unveiling their 'targeted, tactical deals'- 0% financing over 60 months until the end of August.

Well, that certainly sounds targeted. Targeted to the entire population of truck buyers in North America. And it's certainly a change of tactics from the usual, umm, 0% financing over 60 months, that they usually go with.

So, with about $3600 bucks on the hood of every Silverado and Sierra, GM is going to add 0% financing. Which will put them right around what Toyota is doing- about $4000 on the hood, and 0% financing over 60 months.

Dig a little deeper though, and you'll realize that Toyota is laughing all the way to the bank with this decision from GM. First and most importantly, it means that GM is going to go to war with them on price. That probably doesn't sound too good on the surface, but Toyota at present time has far deeper pockets than GM, so they can afford to take less profit on each truck, while GM can't. Second, the incentives picture is more muddy that it first looks- much of the Tundra incentives are on the hoods of base model stripper pickups- which were overpriced to begin with. So in essence, Toyota has applied big rebates to models that could absorb them, while continuing to sell their top end profit heavy models with far less in terms of customer give back. Lastly, the GMT900s are the bread and butter of the GM lineup- any profit taken off the table of these vehicles is a huge hit to GM- by forcing their hand, Toyota has succeeded, even if it results in a rebound in sales for the trucks.

There were worries before the launch of the Tundra that Toyota was going to price themselves out of the picture with their new truck. Instead, it seems like the spider has set a perfect web- one that they have all the resources in the world to entangle their prey in.

Let's see...what else isn't bolted down?

Yesterday, GM announced that it had agreed to sell its Allison Transmission unit to private equity firms Carlyle Group and Onex Corp. for about $5.6 billion. Wall Street cheered the announcement, sending GM shares up to $38.19, nearly $20 per share higher than the shares were at their low point in 2005 during the worst of GM's bankruptcy fears. It seems that GM has managed to get a better price for Allison than Wall Street was expecting.

Allison Transmission, which makes transmissions for commercial trucks, buses, and military vehicles, as well as dual-mode hybrid transmissions for the upcoming light duty hybrid pickups and SUVs and for the popular Duramax/Allison combination in 2500 and 3500-series trucks, is headquartered in Indianapolis, Indiana. The sale announced yesterday excludes a plant in Baltimore that makes conventional and dual-mode hybrid transmissions used in GM's light duty trucks.

The Allison money will help offset the expected $7 billion cost that GM will incur to fund the UAW-Delphi bankruptcy settlement, which (if approved by union membership) will pay union workers upfront payments as well as ongoing supplemental wages for a period of time, in return for a reduced hourly rate in the future. There is also speculation that GM might use the Allison money to help fund a potential union-managed trust fund to pay for workers' health care coverage, similar to the agreement that Goodyear came to with its union membership last year.

Unfortunately for GM, the Allison unit was "highly profitable," and now it has killed another cash cow. The sale of 51% of its GMAC financing arm to Cerberus (the same company that bought Chrysler) marked the sale of another major contributor to GM's black ink in North America.

Other than these two, more "non-core" assets that GM has sold off in the past two years include stakes in Fuji Heavy Industries Ltd. (Subaru), Isuzu Motors Ltd. and Suzuki Motor Corp.

It's a shame that GM has to continue selling assets, but this is a necessary move for them to add to their cash balance and ensure that they can still meet their operating cash needs and keep the company running. But this is not the end of GM selling everything but the proverbial kitchen sink. They're also in talks to sell the (also profitable) medium-duty truck business. No announcement has been made, but the word is that Navistar is the front runner to acquire that business. Medium duty trucks are sold as the Chevrolet Kodiak/GMC Top Kick conventional cab trucks, and the T- and W-series cab over engine trucks, which are rebadged Isuzus, and are generally labeled as 4500-8500 series trucks (versus 1500-3500 series for the light duty ones).

Shedding assets of non-core businesses as GM and Ford have been doing is OK from the standpoint of allowing management to concentrate on core operations, and monetizing an asset, but it also eliminates a layer of safety net should core operations falter. There have been several quarters over the past few years that GMAC results helped to prop up GM's regular results. Now, they'll only be able to help 49% as much as they had before. After this year, there will be no return from Allison, and likely no return from the medium duty unit if it's sold off.

The 2007 Toyota Tundra- Death By Badness

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Look at that thing.

Pug nosed.

The truck is pretty ugly too.

A lot of commentary has been lavished on the Tundra. For the most part, the hype about the vehicle has been justified- it is most definitely an important vehicle for Toyota and the truck segment of the market. Unfortunately for Toyota, although the hype about the impact of the Tundra has been justified, the Tundra itself is an abject disappointment.

We've been told ad nauseum that this thing was conceived, designed and engineered by Americans for Americans. And that's fine and dandy. Unfortunately, Toyota must have hired all of the reject American F-150, Ram, Sierra and Silverado designers and engineers when it hired for the Tundra.

Looks are subjective. My opinion is truth- the Tundra is ugly in pictures and ugly in person. Things don't get any better once you open the door. Shut it, and the entire door panel inside the truck shudders and actually moves around quite a bit. Reminds me of my dad's old 1985 LeSabre, which is probably what Toyota was going for. At 6 feet tall, I can only reach the easternmost portions of the center console by lifting my ample ass off the seat. The fake silver applique is slathered all over the inside of this thing.

In short, everything apart from the marvelous engine/tranny combo is woefully inadequate and shitty. I'd take a Titan over the Tundra any day of the week. I'd take everything short of a Dodge Ram over the Tundra. In an effort to appease the nonsense jibber jabber of American jingoistic retards who always said the Tundra was too small for a 1/2 ton, Toyota has made a 1/2 ton that's big enough, but nowhere near good enough.