Claremont Insider: Sales Slumps Roll Downhill

Thursday, January 28, 2010

Sales Slumps Roll Downhill

Claremont Toyota, whose sales have slumped severely because of the recession, faces even tougher times. Yesterday's Los Angeles Times had a front page story about Toyota's decision to halt the sales and manufacture of eight models because of problems with the gas pedals sticking.

The Times article reported:

Industry experts could not recall any time in recent history when a carmaker had stopped both production and sales of so many models at once. Tuesday's move follows two recent recalls aimed at preventing Toyota-made vehicles from surging out of control, which has been blamed in at least 19 deaths and scores of injuries over the last decade, more than for all other automakers combined.

Toyota could pay dearly for the problem, industry analysts said.

Aside from the immediate drop in sales, Toyota's position as the global sales leader, built on its vaunted reputation for trouble-free cars, is now being called into question.

"This could be an extended issue. It is very serious," said Aaron Bragman, an analyst at IHS Global Insight.

The eight models affected accounted for 57% of U.S. sales last year of all Toyota brands, including Lexus and Scion.

Toyota's woes will hurt Claremont Toyota, and that in turn will trickle down to the City of Claremont, which is heavily dependent on the Toyota dealership for sales tax revenue. At its peak, the local dealership accounted for something like 57% of the City's income from sales tax.

Claremont has been working hard to diversify its sales tax base, but Claremont Toyota remains the town's largest source of that revenue stream. Toyota's decision couldn't come at a worse time for Claremont. The state of California forecasts a $20.7 billion budget deficit through fiscal year 2010-11, thanks to the refusal of the state's leaders to deal with problem in a meaningful way last year. That means the state will be looking to raid more local money to fix its problems, and towns like Claremont will have another budgetary hole to climb out of.

All in all, 2010 is beginning to look a lot like 2009.