Toyota Forces Some Dealers to Expand Facilities

Automotive New reports that Toyota Motor Company has started pushing dealerships to expand service facilities, some even against their own will.

The report indicated that Toyota is pressuring franchises in many case to double or triple service space in an effort to keep maintenance and repairs in house.

Nancy Davies, vice president of retail market development at Toyota Motor Sales U.S.A. Inc., says "Between 2006 and 2010, our units in operation will go up 34 percent," Davies says. "We're not growing our dealer body. We're expecting dealers to step up capacity to take care of our customers."

Mark Johnson, a Seattle-based dealership mergers and acquisitions consultant says. "Some guys are having to triple the size of their service departments because it's 50 percent of what it should be, There is a lot of angst and pressure to spend money.”

Toyota views the lack of in house service facilities as a huge issue, and in some cases it has shorten franchise agreements to two years from the normal six year agreement to those that are out of compliance.

Urban franchises seem to be the hardest hit, "Toyota has never asked me to do anything that didn't make financial sense," says Franchise owner Mike Sullivan, who sells 300 new Toyotas a month in Santa Monica and 350 in Hollywood. "It's all part of the big picture. But at some point, you run out of space." This sentiment may be echoed across the nation. "There is nothing left for me to buy around here," says Earl Stewart a Palm Beach Florida Owner after purchasing all of the adjacent land around his dealership over the last few years. He now prohibits employees from parking on dealership property in an effort to maintain everything under one roof.

Davies says Toyota is "patient" with dealers who are trying to increase service capacity and often has dealers on a string of two-year renewals, rather than "going straight to court." She goes on to add most dealers understand where Toyota sales will be in 2012 and will grow accordingly.

SOURCE: Automotive News

r_driver04 - 5/22/2007 3:22:06 PM

+7 Boost

The current service facilities cannot support the new Tundras(they're too big). So most dearlerships will be forced to upgrade. Good work Toyota, way to think it through.

kpaxx - 5/22/2007 3:26:13 PM

-3 Boost

Toyota is starting to look a lot like GM.

indifferent - 5/22/2007 3:39:40 PM

-4 Boost

completely agree with you.

I think they expanded to fast for their own good.

izfuney - 5/22/2007 5:10:44 PM

+6 Boost

Krudola response from the whinging dealers...
Its the hottest dealership to get your hands on.

They have promised no more expansion so all new sales come from within the current dealer network ...
The expected behaviour... please grow your dealership so customers are satisfied and looked after ...

Common business sense and extreme patience from Toyota ...

EnnNorak - 5/22/2007 5:28:19 PM

+2 Boost

Some years back, GM forced many small dealers to spend a bundle on fancy construction to bring their buildings up to "Image 2000" standards. It's a good thing that interest rates are still low so that the cost of financing the required expansion will be manageable. I do expect it harder to make deals on Toyota cars as dealers attempt to recover the extra investment in a reasonable time.

Will_ - 5/22/2007 6:12:06 PM

+3 Boost

Completely disagree.

For one, Toyota only has three brands to manage. Number two, dealership expansion represents something positive, not something negative. As their customer base grows, naturally one would expect their dealership services to expand to make sure everyone's needs are met. When was the last time GM ever had the knowledge to do that?

jt716 - 5/22/2007 8:01:40 PM

+2 Boost

Doesn't Toyota have a big stake in subaru and daihatsu?

jt716 - 5/22/2007 8:01:42 PM

+2 Boost

Doesn't Toyota have a big stake in subaru and daihatsu?