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The Tundra Is Hot, but Detroit Stays Cool
Toyota's popular new pickup isn't fazing the Big Three--yet
Sharon Solomon, a secretary who lives north of Detroit, has always been a loyal buyer of hometown products. So when she decided to trade in her 1992 Oldsmobile 88 for a pickup truck, she test-drove a GMC Sierra and a Dodge Ram. What did she buy? A $29,000 Toyota Tundra. "It drives as nice as a luxury car," she gushes. "And it's made in Indiana."
Wake up, Detroit. It may have taken Toyota Motor Corp. a few tries, but with its new Tundra--which arrived in showrooms in early June--the Japanese auto maker seems to have finally tapped into the winning U.S. formula for building big, oh-so-profitable trucks. The new competition from Toyota threatens the last bastion of domestic dominance--and the market that has fattened the Big Three's bottom lines. "The Japanese are now poaching where Detroit makes its money," warns Burnham Securities Inc. auto analyst David B. Healy.ROARING START. In the first month, Toyota sold 7,800 Tundras--as many as Toyota was able to sell in a full year with its old T100 pickup, which was never beefy enough to take on Detroit's Big Wheels. The new pickup roared off the starting line so fast that Toyota President Fujio Cho is already giving a "70% to 80% probability" that the carmaker will build a new U.S. plant, most likely next to its Princeton (Ind.) pickup factory. "My job is to make that probability 100%," says Don Esmond, group vice-president of Toyota Motor Sales USA in Torrance, Calif. "I sure would like to have more pickups, and there's a lot of cornfields there in Indiana."
So is there panic in Detroit? Well, not exactly. Sure, Big Three engineers are dissecting The Tundra like a frog in biology class. And yes, Detroit exEcutives speak in reverent tones of Toyota's stellar quality and the Tundra's potential. But they're also quick to note Toyota's past pickup failures and point to its paltry plan to build only 100,000 Tundras annually. Even at full capacity, the Indiana plant could produce only 150,000 this year, analysts say. "Certainly, they are offering a much more competitive product now," says Ford Div. President Jim O'Connor. "But ultimately, customers will vote, and we still feel we'll win that election."
Are Detroit execs underestimating the challenge? "They are still not as concerned as I'd like them to be," says auto consultant Wesley R. Brown of Nextrend in Thousand Oaks, Calif. Perhaps they are also forgetting what is at stake: General Motors, Ford, and DaimlerChrysler sell 2 million full-size pickups a year in the U.S. and haul in the bulk of their profits from those big pickups and sport-utility vehicles. Analysts estimate, for instance, that Ford Motor Co. makes $10,000 on each F-series pickup it sells--a bracing 840,000 a year.
What's more, Detroit should not mistake Tundra's go-slow launch for modest ambitions. After all, the auto maker started with a Kentucky factory capable of building 150,000 Camry sedans in 1988. Today, that factory makes 500,000 vehicles--and the Camry is America's No. 1 car. The Tundra is following that launch model. "Toyota is in the first inning of its truck strategy," says Wasserstein Perella analyst Scott Merlis.SUV SPAWN. The Tundra will also spawn a sport-utility, which will hit the road in the fall of 2000. That could present an even greater threat to U.S. auto makers, since chromed hulks such as the Lincoln Navigator generate $15,000 in profit per vehicle. Transferring Tundra's lauded carlike ride to a big SUV could set a new benchmark. Warns Bulin Group auto consultant John Wolkonowicz: "That's what Detroit should worry about."
For now, the biggest worriers seem to be Toyota dealers who are desperate for more of the pickups. Supplies are so short, particularly for the four-wheel-drive version, that dealers are selling Tundras at $1,000 over the sticker price. "We can't get enough of 'em," says Southfield (Mich.) Toyota dealer Martin "Hoot" McInerney. "It's a hot S.O.B." If the Tundra keeps up its sales pace, Detroit will no doubt think of several more expletives-deleted to call it, too.By Keith Naughton in DetroitReturn to top