BRUSSELS - Toyota Motor Europe has notified all 3,700 of its dealers that their contracts will be canceled at the end of next year and that about half will not be reappointed.
By the end of 2001, Toyota expects to have about 1,900 dealers in Europe. But the consolidation doesn't mean all of the remaining 1,800 outlets will be eliminated, said Juan Jose Diaz Ruiz, executive vice president for sales and marketing.
Toyota is urging smaller dealers to set up partnerships with larger dealers in their sales territories, Diaz Ruiz said. The small shops would continue to service vehicles and take customer orders for new cars. But they would no longer order new vehicles from the factory or keep them in stock, he said. That will be the responsibility of the main local dealers who would share the profits on new cars sold by their partners.
'We are not buying out any dealers. The reductions are being done in consensus with the dealers,' said Diaz Ruiz.
The reappointed dealers will be reorganized into four regional sales areas: southern Europe, the German-speaking countries, Scandinavia, and the UK zone that will include Belgium, Holland and Ireland.
The trouble with having 3,700 dealers is that smaller stores are unable to handle the brand's expanding model range, said Diaz Ruiz.
Under the new structure, the central dealer will order and maintain demonstration cars and provide them to partners when needed.
'The partners will take care of owners' cars and be part of joint or cooperative advertising campaigns,' said Diaz Ruiz.
The reorganization is part of a larger program to change Toyota's brand image in Europe and boost sales from about 600,000 this year to 800,000 units in the coming years, said Diaz Ruiz. A similar program is under way for the Lexus brand, which is also setting up dedicated dealerships.
The changes are an effort to improve customer care and attention, he said. 'In the future, the cost of doing business - especially the cost of information technology and training - will be so high that we need to restructure the organization and end up with fewer and larger dealers that are able to invest in the new technology.'
Toyota aims to increase dealer sales to an average of 400 to 500 vehicles a year, he said. Today, the average is about 160 cars per dealership.
The consolidation effort also anticipates drastic changes in the EU block exemption that permits makers to operate exclusive dealer networks. The block exemption is scheduled to expire in 2001. 'The idea is to make sure our dealers are profitable,' said Diaz Ruiz. 'We remember the deregulation of dealers in the US. Toyota continued to have exclusive dealers dedicated to Toyota that are very profitable and motivated. We want the same in Europe.'
The new central dealers will be required to upgrade their showrooms in line with a new prototype that he said will make the stores 'more functional and open.' About 100 of the larger showrooms will be built in major metropolitan areas.
The new larger dealers will also be required to set up a Web page linked to a global Toyota Web site. By 2001, Toyota's web pages will permit a browser to move from the worldwide page, to the Toyota Europe page, then to an individual country page and finally to the individual dealer in his local area. Dealers will also be able to use the Internet to download information about new products and for advertising, said Diaz Ruiz.