Toyota Spices Up Middle-Aged Corolla to Bolster Profits

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With Toyota Motor Corp. (7203) back on top
as the world’s largest automaker, President Akio Toyoda isn’t
looking to a relative youngster like the Prius hybrid to defend
that lead. Instead, he’s counting on a middle-aged veteran: the
47-year-old Corolla.

Later this year — the company hasn’t said when or where —
Toyota plans to introduce a revamped version of its global best
seller, which last underwent a redesign in 2008. No launch is
more consequential for Toyota this year as the Prius isn’t due
for a major change until 2014 and a new Camry sedan came out
only about a year ago.

For Toyoda, the compact will be a chance to build on
pledges to make cars that are more fun to drive and shed some of
the company’s reputation for blandness. More relevant for
investors, the success of the top-selling car in history will
help determine Toyota’s ability to return to the profitability
it enjoyed before the global financial crisis and the recall of
millions of vehicles.

The Corolla “might be viewed as boring by some, but for
others it’s bulletproof,” said Kurt Sanger, an auto analyst at
Deutsche Bank AG in Tokyo, who has a buy rating on Toyota stock.
“The profit per unit might be lower than other models, but if
you sell that many, you’re going to make money.”

Sanger is optimistic over Toyota’s money-making prospects.
He’s among a dozen analysts tracked by Bloomberg who’ve raised
earnings estimates for the automaker in the past month as the
tumbling yen raises the value of Japanese exports.

The Japanese currency hit 91.26 on Jan. 28, the weakest
since June 2010. Toyota’s annual operating profit gains by 35
billion yen for every 1-yen drop in the value of the Japanese
currency against the dollar, according to the carmaker.

Bland Sedan

Toyota has sold more than 40 million Corollas over the
years. Though the car remained Toyota’s top seller in 2012 —
estimated by the company at 1.21 million deliveries worldwide —
Corolla sales have fallen from a peak of 1.42 million units in
2006 as Honda Motor Co. (7267)’s Civic and Hyundai Motor Co. (005380)’s Elantra
won customers with fuel economy and lower prices.

The Civic overtook the Corolla as the best-selling compact
sedan in the U.S. last year, according to researcher Autodata
Corp. This year, global sales of the Corolla will probably
increase 7 percent to 1.3 million units, according to Takeshi Miyao, an analyst with researcher Carnorama Japan in Tokyo.

The declining popularity of the Corolla — described as
“bland” by Consumer Reports magazine in 2012 — has been
mirrored in the company’s earnings and share price. Toyota’s
profit forecast for the fiscal year ending March 31 is less than
half the amount five years ago. The stock is trading at about
half its level in 2007, when its market value ranked fourth
worldwide, according to data compiled by Bloomberg.

Brad Pitt

Toyota, which reports earnings next week, will probably
triple its net income to 893 billion yen ($9.8 billion) this
fiscal year and earn 1.2 trillion yen next year, according to
the average of 24 estimates compiled by Bloomberg. The Corolla,
meaning “crown of flowers” in Latin, is seen to be among the
top sellers.

“The Corolla remains incredibly important to Toyota,”
said Neil King, global head of automotive research at
Euromonitor International in London.

The car’s history stretches back almost five decades, when
Eiji Toyoda, the current president’s great uncle, first swept
the U.S. with a vehicle that helped the company ascend to the
top of the automotive industry.

Since the first one rolled out in 1966, Toyota has used
figures ranging from Homer Simpson to Brad Pitt to market the
car to the masses. Among them was a young man who bought a used
fourth-generation Corolla 1600GT as his first car. His name:
Akio Toyoda.

Toyota Appliance

“The car taught me the joy of driving,” Toyoda, whose
grandfather founded the company in 1937, said last May at a
Corolla event in the Japanese city of Ohira. “It was like a
good friend.”

Sandy Grossman, who’s owned two Corollas and is in the
market for a new car for his wife, has less fond memories.

“Toyota has become the dullest car company on the
planet,” said Grossman of Coral Springs, Florida. “Since the
late ’90s, they have driven me away with boring vehicles that
look and feel like an appliance”

Toyota, which typically redesigns its cars every five years,
is stepping up efforts to revive interest. At the Detroit auto
show
this month, it showed off the Corolla Furia concept vehicle
in a presentation punctuated by a snatch of Mariachi music and a
comedic dance by Toyota U.S. Vice President Bill Fay. The
sunburst-orange Furia, meaning “fury” in Spanish, was a few
inches longer, wider and lower slung than Corollas in
dealerships today.

Younger Target

Toyota officials at the show said the next commercially-
available Corolla will show Akio Toyoda’s influence, though they
didn’t provide details of its design, features, or price. Kota Yuzawa, an auto analyst at Goldman Sachs Group Inc. in Tokyo,
said in a report this month that the potential changes signal a
greater focus on younger customers.

Toyota won’t be able to rely on its past success to make
the next Corolla a hit as it faces intensifying competition from
South Korea’s Hyundai Motor and Kia Motors Corp. (000270), General Motors
Co. (GM)
, Ford Motor Co. and Volkswagen AG (VOW), according to Maryann Keller, principal at consulting firm Maryann Keller Associates
in Stamford, Connecticut.

“The Corolla needs to become more interesting,” Keller
said. “The same attributes that attracted shoppers 20 years ago
don’t work today.”

To contact the reporters on this story:
Anna Mukai in Tokyo at
amukai1@bloomberg.net;
Alan Ohnsman in Los Angeles at
aohnsman@bloomberg.net

To contact the editor responsible for this story:
Young-Sam Cho at
ycho2@bloomberg.net


Enlarge image
Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Daniel Acker/Bloomberg

The Toyota Motor Corp. Corolla Furia concept vehicle unveiled during the 2013 North American International Auto Show in Detroit.

The Toyota Motor Corp. Corolla Furia concept vehicle unveiled during the 2013 North American International Auto Show in Detroit. Photographer: Daniel Acker/Bloomberg


Enlarge image
Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Toyota Spices Up Middle-Aged Corolla to Keep Industry Lead

Daniel Acker/Bloomberg

The Toyota Motor Corp. Corolla Furia concept vehicle is displayed after being unveiled during the 2013 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S.

The Toyota Motor Corp. Corolla Furia concept vehicle is displayed after being unveiled during the 2013 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S. Photographer: Daniel Acker/Bloomberg

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