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Toyota Dealers Upgrade Showrooms in Credit Crunch

TORRANCE, Calif. - While automobile dealerships are struggling just to survive the industry’s worst downturn since the Great Depression, Toyota is requiring their struggling dealers to dig down into their pockets and invest in upgrading their franchises in order to compete better.

In the midst of a credit crunch when most franchise owners have been hard pressed to obtain capital, Toyota dealers have invested $800 million in new facilities designed to meet the high expectations and growing needs of customers. Over the past five years, they have laid out $3.3 billion in dealership improvements and have committed another $2.2 billion in the next two years.

"An investment of this magnitude is a strong indication of our dealers' confidence in Toyota products, as well as their long-standing commitment to meet customer expectations," said Ernest Bastien, vice president of retail market development for Toyota Motor Sales, USA, Inc.

Paul Eisenstein, a veteran journalist covering the auto industry for some 30 years and founder of auto news service The Detroit Bureau, thinks that upgrading facilities will not resolve a more fundamental problem: Toyota’s dealers are not good when it comes to solving problems and keeping customers happy. “Simply making a showroom look better isn't necessarily enough to move the needle,” Eisenstein says. “As Toyota Motor Sales officials have acknowledged, the company has a bit of a problem.  Its dealers are, for the most part, used to the salad days, when simply having the name ‘Toyota’ on the marquee was enough to get people into the door.  They were less salespeople and more order takers.  But as Toyota has been facing more competition of late, as quality snags have developed and recalls have risen, retailers are suddenly having to do more.”

Pat Lobb Toyota of McKinney, TX. photo/

Currently, 400 Toyota dealers, or 33 percent, have completed all-new state-of-the-art facilities, with another 200 onboard to open upgraded dealerships by 2012. As part of the upgrade, its dealers will construct new facilities that conform to strict standards of a non-profit organization, United States Green Building Council, and their LEED certification program.

Pat Lobb Toyota in McKinney, Texas was the first. Having opened in 2006, franchisee Lobb upgraded his dealership to become the nation's first Leadership in Energy and Environmental Design certified automobile dealership. Regarding its energy saving improvements, the U.S. Environmental Protection Agency site declares, “Pat Lobb Toyota has also become a model in the U.S and overseas for those interested in studying cost-saving design elements.” It says that Loeb’s dealership besides saving energy costs also benefits from media recognition for his efforts.

But Eisenstein thinks there is something more fundamental to improve than upgrading car showrooms. “Toyota still leads on the Consumer Reports charts, but other studies show it slipping, particularly the Toyota brand itself,” Eisenstein observes. “Loyalty is maintained, if not built, on satisfying customers when problems occur, not just by selling them good vehicles and hoping (as a dealer) never to see them again until it's time for a trade-in.”

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Call him at +1 (270) 321-1268, tweet @bluemaumau or email