NEW YORK – After five up-and-down years, Jim Lentz thinks Toyota is right where it's supposed to be.
Five years ago, the company unseated General Motors as the world's biggest automaker and its cars dominated much of the U.S. market with a reputation for bulletproof reliability.
Toyota even weathered the Great Recession with relative ease.
Then came a series of embarrassing safety recalls and a devastating 2011 earthquake and tsunami in Japan that shuttered the automaker's parts suppliers and left it short of cars to sell.
Today, sales have rebounded and Toyota is again making big profits.
Through it all, Lentz has been at the top of Toyota's organizational chart in America. He was the public face of the company as it recalled millions of cars for sudden acceleration. Now he's the North American CEO and a senior managing officer. He says U.S. sales are meeting expectations, and he likes Toyota's position in the market.
That's not to say there aren't new challenges.
The company's bread-and-butter vehicles, the midsize Camry sedan, the Corolla compact and the RAV4 small SUV, are under attack from new models introduced by revived Detroit automakers and newly energized brands from Korea. And there's the question of whether younger generations want to buy cars.
In an interview at The Associated Press headquarters in New York, Lentz talked about the economy, Toyota's position in the U.S. market, young people's car-buying habits, gas prices, and how the company plans to handle tremendous competition. Below are excerpts, edited for length and clarity:
Q: In August of 2008, your U.S. market share was 16.8 percent. Now you’re around 14.4 percent. To what do you attribute the decline and will you ever get back to where you were?
LENTZ: I think at the bottom, after the tsunami and everything else, our share dropped to 12.8, something like that. We were as high as 17 percent in 2009, in the midst of the financial crisis, when many of our competitors didn't have access to capital. They couldn't wholesale cars to dealers, they couldn't provide retail financing, they got out of the lease business altogether. At the same time we had a spike in fuel prices. So we had a lot of tail winds. So I think we were never as good as 17 percent. I can tell you we're much better than 12.8. We're on target to hit our sales plan this year.
Q: Do you attribute some of the drop to more competitive cars in your bread-and-butter markets?
LENTZ:Yes. There are much better cars on the market today than there were five years ago, and compared to 10 years ago, it's a night-and-day difference. One reason the average age of a car today is 11 years is the quality's gotten better. Look at the midsize segment. If you go back 15 years, there were really two major players, Accord and Camry. Today there are arguably five or six really good options.
Q: Why do you think the US auto industry has come back as strong as it has? Did the comeback surprise you?
LENTZ: I don't think it's a surprise. The industry has historically been driven by low interest rates and (strong) consumer confidence. Today, interest rates are still at historical low levels. Consumer confidence, it's wobbling its way back up.
Q: How long will pent-up demand last?
LENTZ: Probably through 2014. If you look at the total number of cars on the road, it typically averages around 250 million. Of that, the cars that are 1 to 5 years old typically are 82 to 85 million of that. The deep, deep recession the automobile industry went through reduced that number down to about 62 to 65 million. It hasn't been that low in terms of raw numbers since the early '80s. Typically a new buyer that's in the marketplace, if they're shopping new or used, they're shopping that certified used 1- to 5-year-old vehicle. Because of the limited supply, the cost of those vehicles is quite high today. On a monthly payment basis it's almost the same to buy a new vehicle. So in time, as that 1-to-5-year-old base builds its way back up, I think we're going to reach that equilibrium probably sometime near the end of 2014.
Q: What happens to the market then?
LENTZ:The market then has to work off of a much better economy and improving economy. If we don't have that I think the market may flatten out.
Q: You’ve come through the tsunami, the recalls, manufacturing issues. What lessons have you learned both as an executive and as a company?
LENTZ: I think if you look at the recalls, we learned to listen much better, we learned to act much faster, and we learned to be much more transparent. And that has to do with dealing with regulators and dealing with customers. The tsunami was a great challenge for us. Our supply chain collapsed, literally within about two hours, and I think we really learned to understand it much better.
Q: Is the recall situation fully behind you?
LENTZ: We've settled the MDL (multi-district litigation) suits. We are making our way through the rest of the issues. I think from a customer standpoint, it's behind us.
Q: What is the long view for Toyota on younger buyers who have a lot of student loan debt and are coming into a lower salary base?
LENTZ: It's a challenge. Despite the debt and despite either underemployment or lower salaries, those under 35 are coming back to the market at a faster rate than any other generation.
Q: If you’re looking at five generations of sales, what’s the impact on technologies inside the vehicle?
LENTZ: I can tell you my dad has navigation. He has no idea what button to push, nor will he ever care.
The technology we put in cars has to be very, very intuitive so that it's simple to use for elder generations but enough techno for younger generations. But younger generations, I don't think they're necessarily amazed with technology. It's a tool to them.
Q: What do you respect or fear most about Ford, GM, Chrysler, Honda?
LENTZ: I have a lot of respect for Alan Mulally and what he's been able to do at Ford. Across the lineup, they've done a great job. That said, there's not a lot of cross-shop that takes place between our buyers and Ford buyers. … Probably the biggest competitor across most series is Honda. If you look at cross-shop, Camry to Accord, it's probably around 25 percent, by far the biggest. That's probably the competitor that we have to really keep our eye on.
Q: What do you see happening in the midsize market? When it shakes out, is the Camry less dominant?
LENTZ: I think both we and Honda over the last 15 years have been less dominant. I tend to always take the customer's point of view, and I'm not sure how important it is that you are the best-selling car.
The new Corolla has it. I think styling-wise, drivability-wise, interior, infotainment offerings, it's light years ahead of the car that it replaced. You've seen it with Avalon, on the Lexus side and with RAV4. We're going to continue to have that strong foundation of quality, dependability, reliability, value, and safety, but now we're able to add this more emotional component. Akio (President Akio Toyoda) wanted more fun-to-drive cars. He's pushing the styling envelope.
Q: You mentioned you drive the Prius to work every day. What do you drive for fun?
LENTZ: I like to test drive a lot of our vehicles and competitive vehicles. You know, for fun. Obviously LFA is a lot of fun to drive. ISF. FRS I think is a lot of fun to drive. But Prius, my wife's on her third-generation car, Prius is an interesting conundrum because it's fun to drive in its own way.