All of the attention up until then had been on the big sedan, which Toyota decided to call the LS 400. But when it came time to unveil the Lexus lineup in Detroit, the LS arrived with a smaller sibling, the ES 250. Illingworth’s nervousness about an entirely new franchise selling just one car, and the emergence of Honda’s Acura luxury brand in 1985, prompted Toyota to add another vehicle to the Lexus lineup. As a placeholder, it took the 1988 Camry and transformed it into a Lexus, primarily with wood-grain trim and leather seats and a higher price. If there were doubts that Toyota could build a luxury sedan, there was even more skepticism about the ES 250. Who would pay $22,000 for a tarted-up Camry, critics said, when they could get the Toyota version for only $13,500? Moreover, wouldn’t the transformed Camry suffer by comparison with the all-new LS 400? Toyota was sensitive to the criticism, and almost as soon as the ES 250 arrived, it promised that there would be a replacement in the near future. But the ES 250 played two roles. It gave dealers a lower-priced alternative to the $35,000 LS 400, putting the Lexus cars within the reach of more customers. And it gave Toyota some practice on experimenting with the Camry, which would prove to be valuable down the line. The experience had a tremendous impact on the development of the 1992 Camry, which became known, to Toyota’s delight, as a mini-Lexus.
The project got under way even as the first of the prior-generation Camrys were being built at Georgetown. The original Camry had been designed to provide more space to buyers who had outgrown the Corolla. Now it was time for the next-generation Camry to grow, too. The end result ranks as one of the most gracious, comfortable cars that Toyota ever built, particularly so because of what it learned with Lexus. The advertising theme, “They just couldn’t leave well enough alone,” seemed apt. The Camry shared a list of elements with its Lexus sibling, which was renamed the ES 300 for 1992, starting with an aluminum V-6 engine (optional on the Camry) and size. Both cars grew in length and width. Each used the same material for the firewall between the engine and the passenger compartment; each had the same sound-deadening fabric; and each used similar supports beneath the engine, to give it steadiness and smoothness while accelerating.
Where such features might be too expensive to offer on the Camry alone, Toyota was able to swing it because it was leveraging them across two models. The primary difference between the two was a unique, slightly stiffer suspension on the ES 300, which added 200 pounds to its weight and gave it more of a performance car feel. The ES also had standard antilock brakes, which were optional on the Camry. But the differences were minute, and to many people, the Camry seemed like a steal. Even if buyers didn’t upgrade to the V-6, the Camry had a nice, basic 145-horsepower, 2.2-liter four-cylinder engine that was as peppy as many of the V-6 engines that were offered by Detroit. And the car was pretty, with its slightly rounded roof and its soft lines, reminiscent of those on the LS 400. Though it became one of the car’s hallmarks, the design was not what Toyota engineers in Japan had originally planned for the car.
When Robert McCurry, executive vice president of the American sales operations, traveled to Japan for a styling review in 1989, he found a Camry that looked a lot like its predecessor, only bigger. “It was conservative, Japanese styling, what Japanese cars looked like at the time,” he said. After the efforts Toyota had gone through with Lexus, McCurry was displeased, and he brought the Japanese engineers a list of what he wanted in the car—namely, a sleeker, more modern appearance and more interior room. The Lexus had been designed completely with Americans’ taste in mind; the Camry had to be, too, McCurry argued. To the engineers’ credit, they came up with a new design within a few weeks, McCurry said. “They realized it and acknowledged it,” he said. The 1992 Camry was the kind of car that Detroit by all rights should have been able to build—a luxurious sedan whose $15,000 starting price was within the reach of most consumers.
But Camry ended up doing far more for Toyota than just serving as a mid-sized car. By 1994, when Toyota introduced a two-door Camry coupe, Okuda had become the company’s chief executive, and he was bent on expanding production in the United States. There was a good reason: the appreciation of the yen. Its value had soared against the dollar, biting into the profits of every Japanese company that depended on the United States for sales. The exchange rate, which had been as high as 160 yen to the dollar in 1992, ultimately reached 85 to the dollar in 1995. The difference cost Japanese companies as much as $2,000 in profits per vehicle. Detroit auto companies were gleeful as they watched their Japanese competitors raise prices above those for many competing Detroit automobiles. As a result, Japan’s share of the American market, which had been 35 percent during the early 1980s, fell to just 22 percent in 1994. The situation led to declarations that the Japanese threat was over, that the competition had been put in its proper place and the Detroit companies could relax. Their focus was already shifting to the light truck market, which was red hot thanks to the popularity of vehicles like the Ford Explorer, the Jeep Grand Cherokee and even the Chevrolet Blazer, which was finally available in a four-door version that year, prompting a flock of GM executives, including the CEO, Jack Smith, to take them home as their company cars instead of big Cadillac sedans.
But the demise of the yen turned out to be a blessing in disguise for the Japanese companies, and ultimately a benefit to American customers. It forced the import companies to look more seriously at the American market as a production source. Shifting market trends made them get serious about light trucks, which they had only skirted in their emphasis on cars, and it forced them to leverage all their resources to fill out their lineups. The idea of platform sharing, as it is called in the industry, wasn’t a new one. Over the years, carmakers around the world have tried all kinds of ways to take a basic chassis and transform it into something else. The practice flourished in the 1980s, when Chrysler introduced its K-cars, which proved the base for its original minivans, while GM rolled out whole families of cars that were shared among its various divisions, such as the small J-cars, the compact X-cars and the mid-sized A-cars. They were supposed to share components under the hood and look different on the outside.
Instead, they ended up being different underneath, because the companies’ various purchasing divisions didn’t coordinate when it came to buying parts, and too much alike on the outside, despite various attempts to differentiate the cars with headlights and hood ornaments and chrome (what the industry calls “jewelry”). GM was stung by a famous commercial for Lincoln in which a waiting customer fumes because a valet parking attendant can’t tell the different Oldsmobiles, Buicks and Pontiacs apart. To really get the idea of platform sharing right, vehicles have to look different on the outside, drive differently and have different interiors, but have as many common components as possible underneath. That’s easier now than it was in the 1980s owing to advancements in computer-aided design, and with the high costs of developing vehicles, even more important. Auto companies spend an average of $1 billion on each platform, including the revisions needed in factories to build the new vehicles. Something as simple as a stamping die, used to make a hood, can cost as much as $500,000. A single day’s delay in a vehicle development program adds $1 million in cost. The burden is on companies to keep costs as tightly in line as possible, and that is one of the hardest tasks a manufacturer faces, because there are so many ways that projects can drift.
Faced with the burden of the strong yen, Toyota set its manufacturing experts, product planners and engineers off to see what they could yield from the basic four-door Camry. In his office in Torrance, Toyota’s chief of advance product planning, Chris Hostetter, began jotting down ideas and sending researchers off to see how consumers would react to them and to find that if they had any requests. One of the first reactions was: Build us a decent minivan. Toyota had sold the bulbous Previa for a number of years, and it got high quality ratings, but the Japanese-built minivan was just plain odd compared with the versatility of Chrysler’s minivans. It was narrow, had rear-wheel drive and wa
s hard to steer. It also had an underpowered, mid-mounted engine under the front seat. Moreover, it was expensive. Its reputation had been sullied when Detroit auto companies filed suit against Toyota and Mazda in 1992 before the Federal Trade Commission, charging that the Japanese companies were selling their minivans for less than they charged in Japan. The dumping suit seemed frivolous, in view of the fact that American companies controlled 94 percent of minivan sales in the United States and that the Previa was among Toyota’s worst-selling products. Though the Japanese companies won their case, it was clear that if Toyota wanted to compete in the minivan market it needed a more appropriate vehicle. Hostetter doesn’t agree with the criticism but understands why Previa had to go. “It was a beautiful vehicle that didn’t fit the core of what Americans wanted,” he said.
What customers wanted, the research showed, was a front-wheel-drive minivan with a V-6 engine. The end result was the Sienna, built from the Camry chassis and produced at the Georgetown assembly plant. Though it wasn’t the first U.S.-built minivan from a Japanese company—Nissan built the Quest in Avon Lake, Ohio, in a joint-venture plant with Ford—it was the first time that a Japanese company had built a minivan on the same assembly line with its cars—in contrast to Detroit automakers, who still dedicate whole plants to them. Toyota plant manager Mike Da Prile turned to an old friend, Dennis Pawley, the executive vice president of manufacturing at Chrysler, for help. Years before the pair had worked together at GM, with a third colleague, Gary Cowger, now president of GM’s North American operations. During the 1990s, Pawley had begun crafting the Chrysler Operating System, a manufacturing process that he based on TPS, and Da Prile had allowed Pawley’s manufacturing engineers to do research at Georgetown. (One of the creators of the Chrysler system, Jamie Bonini, would end up joining Toyota in 2003, at its Princeton, Indiana, truck plant.)
In return, Pawley let engineers and manufacturing staffers from Toyota come up to Chrysler’s minivan plant in Windsor, Ontario. There they learned how to install the big pieces of carpet that Toyota’s minivans would require, which were far larger than the carpet in a Camry. They also got ideas on how to assemble parts in the rear of a minivan, which was longer than one of the Toyota sedans, and they came up with a way to install the roof insulation, called the headliner, that stretched the length of the vehicle. Then the Toyota experts refined the processes, to the point where there were only eight spots, out of more than 200 tasks along the assembly line, that were significantly different from the way they built the Camry. One place was the door assembly area, since the Sienna had sliding doors on either side. Unlike Honda, where the idea of two sliding doors had sparked a showdown between project leader Odagaki and his boss, Toyota executives accepted the idea right away because it was a feature on the Chrysler vans, according to Hostetter.
By the time the Sienna went into production, the Georgetown plant had already doubled in size and added another vehicle to its lineup: the full-sized Avalon sedan. It was the biggest car that any Japanese company built in the United States, and it was in direct response to requests from Camry owners who wanted to be able to transport five people comfortably, instead of the four that could fit with ease into a Camry. Here, McCurry played a personal role in the car’s development. As with the Camry, he wasn’t happy with the first effort that Japanese engineers showed him. The burly executive pulled open the driver’s-side door, hopped inside, put the seat back as far as he could go and pointed to the steering wheel. “I want four more inches between my legs and the seat,” he said.
Moreover, McCurry declared the car’s trunk too small, dictating that it had to fit four sets of golf clubs, a frequent selling point for Lincolns and Cadillacs. Upon his return to Japan, McCurry got his wish: The engineers had stacked four bags of clubs next to the car, eager to show him that they would fit inside. Avalon came available only with the V-6 engine, another McCurry request. At $25,000 it was more expensive than a Camry, but a little cheaper, and certainly roomier, than the luxury ES 300. Avalon brought up inevitable comparisons to what Alfred P. Sloan had envisioned, generations before, when he laid out identities for GM’s division. Sloan had famously declared that GM should sell “a car for every purse and purpose” and encourage its customers to trade up the scale of its divisions as they became more successful. If the Camry was Toyota’s Chevrolet, then the Avalon, it was said, would have made an ideal Buick. Hostetter disagreed. “It was never meant to be our Buick,” he said. “It was just meant to satisfy the needs of our buyers for more space and a larger sedan.” Avalon is a low-profile car. Like the Sienna, it sells about 90,000 vehicles a year, but each turns a profit for the company and allows its dealers to compete in more segments of the market. In typical fashion, Toyota signaled in 2003 that it was about to get more serious in the minivan market when it began building a new version of the Sienna at its truck plant in Princeton, taking a page from Honda by introducing a much bigger, plusher minivan that from the rear looks like an SUV, not a Mommy-mobile. The latest Sienna is the result of a 50,000-mile journey by Toyota’s engineers across the United States, and an extensive research effort in which not just parents, but children, were asked for their input. The minivan, as a result, had features like a fold-down third rear seat that splits in two, allowing room for both an extra passenger and that person’s gear. Sienna was an instant success: Within days of going on sale in March 2003, it had spawned waiting lists of seven to 10 weeks. Moving the minivan from Georgetown to Princeton gave Toyota more room to build more Camrys. That marked another manufacturing feat. It meant that Toyota could build minivans and pickup trucks on the same assembly line—even though one is based on a car frame and the other on a truck frame—something still undoable for its competitors from Detroit.
Still, a minivan and a family sedan are hardly groundbreaking vehicles. They are simply ways for Toyota to keep pace. Two other derivatives of the Camry—the Lexus RX 300 and the Toyota Highlander—were far more significant to Toyota. The RX, which went on sale in 1998, and the Highlander, which followed in 2001, were Toyota’s first entries in a market that would explode in the next few years: crossover vehicles, or sport wagons. In essence, these are sport utilities that are built on a car chassis instead of the rigid truck frames from which sport utilities used to be built. Lately, Detroit companies are claiming that they invented this new segment of the market—Chrysler with its Pacifica crossover, which debuted in spring 2003, and Ford, which is developing the Freestyle, whose debut date still lies ahead. GM has its own on the way, and analysts are predicting that the sport wagon market will mushroom in coming years as consumers give up bulky truck-based SUVs and shift into the more maneuverable crossovers. But they are years behind Toyota, which introduced the second generation of the RX 300 in 2003, called the RX 330, and plans another version of the Highlander in the near future. The RX 300 was Lexus’s third light truck product to be introduced within two years, before either GM or Ford had been able to get luxury trucks onto the market (the Lincoln Navigator and Cadillac Escalade hit the market in 1998).
The idea of a Lexus light truck had been a revolutionary one. It first came up in 1991, when Illingworth, the Lexus general manager, traveled to Nagoya, Japan, with McCurry to see the next-generation version of the Land Cruiser SUV. The daunting Land Cruiser, a true monster of a sport utility, had been around since 1964 and was a perennial if modestly selling member of the Toyota lineup. Looking at the future vehicle, McCurry suddenly grabbed Illingworth’s arm and said, “You need that in the Lexus division.” Illingworth was stunned by the concept, since none of Lexus’s competitors had even conceived of a luxury sport utility. It was years before Acura introduced the MDX, or Infiniti the QX4. Neither Mercedes nor BMW had talked about their luxury sport utilities. The only thing close to one was a Range Rover, priced thousands of dollars above what a Lexus cost. “I said, ‘Bob, you’re nuts,’” Illingworth recalled. “But he could see that was where the market was heading. One of the curious things to me about Toyota is how w
e do make those right decisions when others don’t.”
McCurry said he had an instinct that baby boom consumers, already beginning to buy Ford Explorers in big numbers, were going to want to go plusher someday in sport utilities. In 1996, Lexus turned the Land Cruiser into the LX 450, its most expensive offering to date, costing close to $60,000. It introduced an updated version in 1998, called the LX 470, and introduced it at the same time as the RX 300. Though the crossover vehicle was an unfamiliar animal on the American market, Hostetter could see a need for it emerging as early as 1993. He noticed that baby-boom–era buyers were returning their Land Cruiser and 4Runner sport utilities and pickup trucks after their leases expired, and not taking home new ones. The company’s surveys showed that these customers had the highest dissatisfaction of any of Toyota’s owners, unhappy with the vehicles’ fuel economy, rough handling and size. Although Toyota had introduced a Camry station wagon, these buyers weren’t interested because they had been shuttled around in station wagons as children and thought them to be passé. Hostetter started tinkering with the idea of an SUV that had the handling characteristics of a car but the room and functionality of one of the bigger vehicles. “I had dreamed about it for a long time,” Hostetter said. It was a market that Toyota didn’t want to ignore, because these were wealthy customers who were willing to spend significant amounts of money on their vehicles.
The End of Detroit Page 14