Revving up for recession's end

FRIDAY INTERVIEW:Dave Shannon, managing director, Toyota Ireland

DOTTED AROUND the walls of the meeting room at Toyota Ireland’s west Dublin headquarters are pictures of the Toyoda family, the Japanese founders of the marque. The images serve as an instant reminder of how the reputation of the self-styled “best-built cars in the world” came crashing down last year after the discovery of an accelerator fault prompted a recall of more than eight million vehicles worldwide and triggered a US senate committee inquiry.

The recall – and, more significantly, Toyota’s handling of the issue – became a textbook example of how not to handle a public relations crisis. Add to that a number of subsequent smaller-scale recalls, and the disruption to production caused by the Japanese earthquake, and things couldn’t get much worse for the company that had prided itself on being the world’s top car manufacturer.

Dave Shannon, managing director of Toyota Ireland, is keen to downplay the event – “recalls are part and parcel of the business” he says at various points during our meeting – but the no-nonsense, gregarious Wicklow man admits it was a tough time for the company.

“Yes, it was a shock, not that there was a recall, as these do happen, but the scale of the recall. We heard about 24 hours before the news broke. Suddenly there was wall-to-wall media coverage.”

Toyota’s stilted approach in dealing with the issue attracted widespread criticism. While Shannon is reluctant to criticise Toyota, there is a suggestion that the company was slow off the mark.

“The first week or so we had to do our own thing. The first few days of the crisis were caught up in what was happening in America. After that, the level of support we got from Toyota Europe and head office was second to none.”

Could Toyota Ireland have handled it better?

"There was criticism at the time that we didn't go on Morning Irelandthe day the news broke. We simply couldn't allow someone to go on the radio when we didn't have all the facts. When we did have more information, by 10 o'clock that morning, we went on the Pat Kenny programme.

“We decided early on that PR wasn’t going to solve our problem for us. The only way this would happen was through the dealers and our own staff. Our belief was that we would be judged in 12 or 18 months’ time, not on PR, but on how we dealt with the problem, how we dealt with our customers and whether we did the right thing.”

More than a year after the recall, it seems Shannon’s confidence in the brand and customer loyalty has been borne out.

Despite the crisis that has enveloped the motor industry generally, Toyota Ireland appears to have weathered the storm better than most had expected. While the brand – which has held the number one position in Ireland in terms of market share in six of the last 10 years – slipped to second place in 2010, so far in 2011 Toyota remains the most popular new-car purchase for Irish consumers and maintains a 14 per cent market share.

Apart from the high-profile closure of Galway dealership Hogan’s, which had four dealerships, Toyota still has 56 dealers in operation. “In effect we have lost 6-7 per cent of our dealerships. This compares to more than 20 per cent for the motor industry on average,” Shannon says.

While many of the major global car manufacturers have abolished the distributor system, largely dealing directly with dealers in Ireland, Toyota Ireland is one of the few motor firms still running as a privately owned, Irish distributor.

Its roots stretch back to the 1970s when the late Tim Mahony, “convinced the Japanese that he was the right person to run the Toyota franchise”. By 1986, the company had become the number one player in the Irish market for the first time.

In 1976, aged 22, Shannon left a job as an accounts clerk with a heating and ventilation company to join Toyota Ireland, working his way up through the ranks to become a rep, area manager and fleet manager.

Having managed the Daihatsu licence for the Mahony family, Shannon left the company in the mid-1990s to run the Daihatsu brand when it was taken over by Inchcape.

“I had been heavily involved with building up the Daihatsu brand so it made sense to continue with it. I had also spent most of my career with Toyota so it was a good time to try something new. Two years later, Tim Mahony rang me up and offered me the job of managing director. I’ve been there ever since.”

Mahony died in 2008, but the Mahony family are still active in the company. Tim’s daughter, Joan Ward, is chairwoman, while son-in-law Steve Tormey is deputy managing director with responsibilities for sales and marketing.

While coy about financials – Toyota Ireland’s holding company is privately held – turnover last year was €220 million, down from €392 million in 2008, and compares to €132 million in 2009, though Shannon is keen to stress that 2009’s figure took place against a 65 per cent market decline.

The dent to turnover revealed in Toyota Ireland’s figures illustrates the enormous difficulties faced by the Irish motor trade since the onset of the recession.

While the number of new cars sold in 2007 reached 186,000, this figure had plummeted to 88,000 in 2010, a figure that was cushioned by the scrappage scheme.

The next major issue facing the car trade is the abolition of that scheme, due at the end of the month. How will the industry fare when this happens?

“There were car sales before the scrappage deal. It’s also important to remember that the scheme only applies to certain sections of the market, namely old cars. In saying that, will it be slow in July and August? Absolutely, but we’re confident business will pick up. We believe that the 90,000 sales predicted this year will be matched by another 90,000 done next year. After that, we’re hoping that after 2113 we might be getting back to 120,000, anything up to 150,000 cars.”

The other issue facing the trade is the number of dealerships in operation. Will some of Toyota’s 56 dealerships have to close?

“That’s not our intention. Our intention is to maintain the representation we have in the country at the moment.”

While he admits that most Toyota dealers are just about keeping their heads above water, he believes the current system operated by Toyota has been proven to work.

“The challenge that faces us in Toyota Ireland and the network is to make the existing dealer network viable while we wait for the market to rebound.

“There’s no room in business for sentimentality, but there is a place for loyalty. These dealers have given us incredible service over 25 to 30 years. We should be better than just deciding the simple solution is to slash and burn.”

On the subject of trends, Shannon believes that while electric cars are the future – he drives a Prius – any major buy-in will be medium to long term.

“I’d view the Government’s plan that 10 per cent of all cars will be electric by 2020 as very ambitious. Range anxiety will have to be overcome before electric cars become totally acceptable.”

He also believes that recalls will increasingly become a feature of the industry.

“Toyota were rattled by what happened. They want to make sure they’re never left in that position again. I think recalls will be an ongoing feature over the next while, for all car manufacturers.”

But for Shannon, ever the salesman, even that may not be a bad thing.

“I think it should give great reassurance to consumers. There are very few industries that recall products that are more than 10 years old to fix something that may go wrong. It’s a mark of the professionalism of the industry that the industry goes to the levels it does to make sure its standards are up to scratch.”

ON THE RECORD

Name: Dave Shannon

Title: Managing director of Toyota Ireland

Age: 56

Family: Married to Trish, and has three children – Brian, Aideen and Claire.

Lives: Wicklow town, where he was born

Hobbies: Puts his car salesman skills to good use by selling lottery tickets every weekend for his local GAA club St Pat's, where he is actively involved.

What he drives: Toyota's hybrid car, the Prius – "initially because I felt I had to; now because I like it."