'97 Camry Puts Pressure On Ford, Other Rivals
Less is more, at least according to Toyota Motor Company. With the introduction of its updated Camry, Toyota is opting for a Zen-like strategy: more car for less money.Skip to next paragraph
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Price cuts averaging $899, or 4 percent, reflect an aggressive, four-year cost-cutting program triggered by unfavorable exchange rates. But with the dollar now regaining strength against the yen, it suggests Toyota - and other Japanese automakers - could be ready to make a new assault on their American competitors.
"When the dollar was in free fall," recalls Camry chief engineer Kosaku Yamada, "improving the [cost base] of the product became as important as the product itself."
Toyota has done a good job improving both, according to initial reviews. The 1997 Camry is longer, roomier, more roadworthy, and notably quieter than the car it replaces. Already one of the most problem-free cars in the country, its quality also has been improved on the new model, Toyota claims. Prices will range from $16,400 to $24,000.
Though the new Camry has a more sporty appearance - what Toyota calls "edge design" - critics complain it's still rather bland. But company officials insist they want conservative rather than cutting-edge styling. What really seems to matter most to Toyota managers is what customers can't see on the new car.
Take the four clips used to hold interior door panels in place. On the 1996 Camry, the clips were nickel-plated. On the new car, they're not, saving 24 cents a car. Then there's the radio antenna, now molded into the window. That saves another $20. It's all part of Toyota's "epic cost-down" program, which has cut costs $1,500 per car from the '96 model, press reports suggest.
Toyota can now turn a profit on the new car, even with the yen at close to 100 to the dollar, Mr. Yamada says. He also notes the Camry is just the first car to go through the cost-down program. According to industry insiders, the target is to remain profitable, even with the yen at 80 to the dollar, instead of 110 at present.
That is causing real concern among the Big Three US carmakers. "It means that the threat to us as American manufacturers gets worse," laments Ford Motor Company chairman Alex Trotman.
Ford is especially vulnerable, since its midsize Taurus competes directly with the Camry. A year ago, Ford redesigned the Taurus and saddled it with a markedly higher price tag. Since then, buyer price resistance has prompted Ford to fight back with hefty rebates and a new, lower-priced base model.
Even with those moves, the 1996 Camry has been breathing hard down Taurus's back bumper. In May and August, the old Camry surged to the top of the US sales charts. For all of 1996, Toyota forecasts Camry sales will reach 340,000, not much behind the 366,000 Taurus sedans and wagons Ford sold in all of 1995.
Toyota's balance sheet has been hurt badly by the yen's unexpected surge. The cost-down program will allow the automaker to trim prices a bit while still boosting its bottom line.
CONSUMERS are the other big winners, says analyst David Healy at Burnham Securities. Competition from the new Japanese models "will not only lead to more incentives, but force [the Big Three] to hold down '97 model prices."
On the whole, Ford, General Motors and Chrysler will raise 1997 prices by barely 1.6 percent, or about $375 a car, compared with 2.5 percent, or $520, last year.
They aren't the only ones feeling the fall-out from the new Camry. Other Japanese manufacturers are racing to trim design and production costs on their own products. And that could prove especially difficult for some of the smaller importers, such as Suzuki, Mazda, and Mitsubishi.
"We're under a lot of pressure right now, and it won't be as easy for us to cut prices without hurting our bottom line," said an executive at one of the small Japanese brands, asking not to be quoted by name.
One thing is certain. The new Camry sets a benchmark for the industry in terms of quality, content, and value. For rivals, that's a tough combination to beat.