Dealerships brace for Toyota decision

Toyota Corp.’s decision to issue a recall and halt sales for eight popular models brought a surge of activity to Bob Smith Toyota and Scion in La Crescenta, but for the wrong reasons.

Confused car owners were calling the dealership nonstop, said Ron Smith, a sales representative at the dealership.

“Our phones are ringing off the hook,” Smith said. “Customers bought cars and want to know what the deal is and this and that. It’s a turmoil.”

The Japanese automaker on Tuesday added to its recall announcement from a week prior by abruptly stopping sales of the vehicles, including its popular Camry, Corolla and RAV4 models, because of a problem with sticking accelerator pedals, which the company is investigating.

Although dealers are eager for a quick resolution, the announcement could mean trouble for Toyota outlets in Glendale and La Crescenta, which will not be able to sell 57% of the company’s product line in the immediate future, experts said.

“This is not good news for their bottom line,” Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation, said of the company’s dealerships.

Representatives at Toyota of Glendale declined to comment on the effects of the recall and sales stoppage announcement.

Auto dealers have struggled for most of the last two years as demand for new cars plummeted during the recession.

The federal “cash for clunkers” program helped boost sales temporarily, but many experts believe the program had little stimulative impact overall, instead cannibalizing sales that would have happened in later months.

Toyota’s recall and partial sales wall could bring further losses to its dealers, many of whom have seen drops in business of about 25% over the last year. The National Automobile Dealers Assn., in a statement about the recall, acknowledged the challenges it would pose to dealers and expressed optimism that Toyota would find a solution to the accelerator problem soon.

“This is creating a very difficult situation for dealers, in an already tough market,” the group said.

But other brands and their dealerships could get a boost from the Toyota decision, because shoppers will likely start looking into alternatives with many of the automaker’s popular models off the market, said Harold Kassarjian, professor of marketing at the Cal State Northridge College of Business and Economics.

“Within a week or two or three, I think people will be going more over to Chevrolet or Ford dealerships,” Kassarjian said.

While the company made “a brilliant move” in issuing a voluntary recall and examining the problem, its brand image among consumers as a producer of safe and reliable cars may come into question as American companies attempt to ramp up interest in their products, Kassarjian said.

“One cannot necessarily say that the Japanese car is necessarily better,” he said.

That was the hope at Community Chevrolet in Burbank, where sales representatives were readying to welcome more shoppers who might be questioning the benefits of a Toyota over an American model, said A.J. Mendoza, a sales manager.

“Toyota’s been always known for its quality and durability, and certainly having issues like this with a large amount of their inventory and vehicles that they manufacture will definitely, I think, lead customers to give that a second thought and maybe be more apt to shop other brands,” Mendoza said.

Community Chevrolet’s sales were down by as much as 40% during 2009. But representatives were hoping a change in consumer attitudes toward Toyota could help to get 2010 off to a good start, Mendoza said.

“We are anticipating certainly an increase in business,” he said.

Toyota will still sell its Prius and other hybrid models, which have not been affected by the company decision.

Recalled models include the Avalon, Camry, Corolla, Highlander, Matrix, Tundra, RAV4 and Sequoia for the years dating back to 2005.