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Associated Press
James Lentz, Toyota’s North American CEO, talks about the industry in an interview with the Associated Press.

Toyota chief talks market slice, future

– 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 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.

In an interview at The Associated Press headquarters in New York, Lentz, Toyota’s North American CEO, 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:

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. If the industry comes in at about 15.5 million (annual car and truck sales), our share will be 14.4 to 14.5. So I think we’re in good shape.

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.

Q. Why do you think the U.S. auto industry has come back as strong as it has? Did the comeback surprise you?

Lentz. 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. Part of that’s being driven by housing, which is making its way back.

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 recession the automobile industry went through reduced that number down to about 62 to 65 million. 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. The economy, it seems, is in a stall. If you were king for a day, what would you do?

Lentz. In hindsight, I probably would have attacked the housing issue much faster. That might have brought consumer confidence back faster. 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.

Q. Is the recall situation fully behind you?

Lentz. We’ve settled the MDL (multidistrict litigation) suits. We are making our way through the rest of the issues. I think from a customer standpoint, it’s behind us.

Q. Do you consider it high that gasoline has averaged $3.50 for three years, and does it matter anymore?

Lentz. What changes behavior is rate of change. So if gasoline goes from $3.50 to $4.50 over eight months, I don’t think consumers change their buying behavior. But if it goes from $3.50 to $4.50 in 60 days, that’s when we see change.

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. 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. 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. But today a Corolla versus a Focus or midsize car, there’s not that much cross-shop. Even less with General Motors and Chrysler. 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.