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Toyota is trying for a do-over in trucks

By
Doron Levin
Doron Levin
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By
Doron Levin
Doron Levin
Down Arrow Button Icon
July 30, 2013, 5:38 PM ET
American.

FORTUNE — Toyota Motor Corp. is mounting a new charge on the full-size pickup market in the U.S. after learning a painful lesson in humility when its last version of the Tundra fell short.

Many were predicting that shopper enthusiasm for Toyota’s (TM) current Tundra model might impair, perhaps critically, demand for Ford Motor’s (F) F-Series and General Motors’ (GM) Chevrolet Silverado pickups — those automakers’ two biggest profit-makers. The 2007 Tundra was the first model from Toyota to compete in size and capability with Detroit’s entries.

Instead, fortune intruded with the arrival of the nation’s big housing meltdown, followed by the global financial crisis, severely depressing all truck sales. Ford and GM, moreover, double-downed to improve and reinforce their own pickups. Consequently, Toyota’s new pickup plant in San Antonio, Texas — meant in part to strengthen the Tundra’s all-American credentials — has struggled to reach its operating capacity. Toyota added production of its smaller Tacoma at the plant to make up for fewer Tundra sales.

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Production starts on the new Tundra next week in San Antonio. The truck is redesigned with a new exterior and improved cabin appointments, maintaining the same engine and transmission as the previous model. Bill Fay, group vice president of Toyota’s U.S. sales subsidiary, said the automaker has a strategy to grow sales of the larger Tundra and smaller Tacoma. Toppling Ford or GM’s entry isn’t the point. “Tundra and Tacoma sold nearly a quarter-million units last year, claiming 18% of the combined retail compact and half-ton pickup market,” Fay said. “That’s about the same as our passenger car share” in the U.S.

Still, Toyota sees opportunity to make inroads, even among some hard-core devotees of Ford, Chevrolet, and Dodge Ram. Customers of Detroit’s trucks usually display dogged loyalty to their brands. Gaining consideration from Ford, Dodge, and Chevy buyers requires essentially proving that the Tundra is tough and as “American” as its rivals. Thus, Toyota designed the truck in California, engineered it at Toyota’s Ann Arbor, Mich. research labs, and makes it in San Antonio. (The model’s engine and transmission are both built in the U.S.)

Even the chief engineer for the Tundra, Mike Sweers, is American-made. He grew up on a farm south of Grand Rapids, Mich.: “I grew up with trucks, used them all my life. I’m proud of making a truck that I’m proud to drive.”

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Because fuel efficiency has risen as a factor in truck choice, especially among those who use the vehicles for their work, government ratings have grown in importance. Sweers said Tundra’s most powerful 5.7-liter V8 engine gets the same combined city/highway rating of 15 miles per gallon as smaller, less powerful engines from competitors. “They tend to advertise their highway ratings, which are higher. But that means owners don’t get what they expected,” he said. Toyota has considered raising efficiency by matching competitors with start-stop engine technology and cylinder deactivation to improve ratings — but decided against the measures due to cost.

This reception for the new Tundra could be more gratifying for Toyota, especially since housing and the economy are recovering, motivating many owners of pickups to trade their aging vehicles. And, according to Jessica Caldwell, analyst for Edmunds.com: Pickups are profitable to have around, even if sales are smaller than at Ford or GM.

One of Toyota’s most formidable assets will be its two-truck, large-small strategy, with Tacoma occupying the junior role in the partnership. Ford and Chrysler (to Toyota’s advantage) no longer build small trucks, GM Colorado/Canyon entries are dated. Toyota has learned it isn’t likely to displace Ford and Chevrolet’s truck business anytime. If it doesn’t forget that fact, the Japanese automaker’s truck franchise will have avoided a pointless distraction.

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By Doron Levin
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