Toyota's Texas Shoot-Out

    It used to be that when one of the major Japanese automakers launched a big new pickup truck, Big Three executives said they weren't too worried. They have traditionally bragged about their loyal buyers and the fact that past efforts from Nissan (NSANY) and Toyota (TM) have captured less than 10% of a market that sells 2.2 million trucks in a down year.

    But down in Texas -- the heart of the pickup market -- a shoot-out is brewing. And Ford Motor (F), for one, is leaving nothing to chance. The company is ramping up a marketing and public relations push to counter the noise being made in advance of the opening of Toyota's new San Antonio plant, which will build 200,000 of its new Tundra pickups a year starting next month.

    To make the point that Texas is a vital market, Ford Chairman and family scion William C. Ford Jr. is scheduled to appear on Jan. 22 at Jordan Ford, San Antonio's oldest Ford dealer and one of the nation's biggest sellers of F-series pickups [see BusinessWeek.com, 4/19/06, "America's Favorite Pickup"]. New advertising and bigger incentives are also in the works. "Toyota will sell those trucks to someone," says Jordan Ford owner Marc Cross. "But it doesn't have to be to our people. They can sell them to Dodge or GM people."

    A Battle for Market Share It's easy to see why Ford is desperate to fend off Toyota and GM, both of which are launching new pickups. Ford is the Texas pickup leader with 37% of the market. GM's two pickups, the Chevrolet Silverado [see BusinessWeek.com, 1/23/07, "Chevy's Silverado Lining"] and GMC Sierra, combine for 33% of the Texas market and Dodge's Ram has 19.5%.

    Toyota's outgoing Tundra -- which is smaller than every other company's big truck -- has just over 5% of the Texas market. Nationally, it hasn't been a big player in the segment, either. The truck was just too small for many pickup buyers to take seriously. But Toyota's new 2007 truck will be the same size and have horsepower and towing abilities competitive with the incumbent American pickups. The new Tundra will also offer a crew cab, three different bed sizes, three different engines, and eventually a diesel option.

    Toyota is taking aim at market share and the big profits pickups bring home. For any carmaker who can keep incentives low, a loaded full-size pickup can make $5,000 or more in variable profit.

    Local press coverage of the new San Antonio plant has gotten Toyota plenty of buzz in the year leading up to the new Tundra's launch. To add to that, Toyota aired commercials during National Football League conference championship games over the Jan. 20-21 weekend. In the commercials, the narrator -- complete with Texas drawl -- tries to appeal to blue-collar sensibilities by bragging about the Tundra's transmission and towing abilities. "These ads are doing what they need to do," says Jim San Fillippo, consultant with Automotive Marketing Consultants.

    Fighting Back with Incentives Of the Big Three automakers, Ford may have the most to lose, says James Hall, vice-president of auto research firm AutoPacific. GM just launched a new truck, and Ram buyers like their truck's unique front-end styling. But Ford may be the most exposed because it has the most share of the segment. "Whenever you have new players coming in, the one at the top of oligopoly gets hit the hardest," according to Hall

    Not surprisingly, Ford has some aggressive incentive deals going, and there are more coming. The company has around $3,000 in rebates, plus another $1,500 in loyalty coupons for current owners of Ford's Super Duty heavy-duty pickups and its diesel trucks. Coincidentally, Ford's annual Truck Month sale starts Feb. 16, about when Toyota will make the official launch of its truck.

    Ford hasn't disclosed what the new deals will be next month. But dealers are expecting some good promotions. Says Cliff Johnson, owner of Texas Motors Ford in Fort Worth: "Katie, bar the door. We're going to move some merchandise."

    Ford says it isn't spending more on advertising. But it is trying to make the point that the company is just as much a part of Texas communities as Toyota. Ford has been running TV ads touting its heritage in Texas, as well as philanthropic activities in the state.

    Grassroots PR Campaign In November, Ford even brought 14,500 pickup owners to a free concert with country singer Toby Keith in San Antonio. And last fall, Ford sponsored the Ford Tough high school football player of the week campaign to tap into the gridiron scene, which is huge in Texas.

    Ford even shot video of Toyota's San Antonio plant while it was under construction, showing that the contractors building the factory drove mostly Ford pickups. But Ford never used the footage, says Mark Grueber, Ford's strategic marketing manager for the Southwest. "It shows that Ford is still the choice of construction workers and contractors," Grueber says, but Ford never aired the ad because "we have to act like we're the leader."

    Instead, some dealers said they have used the video to train salespeople. It makes a good pitch on the showroom floor. Ford will need to make a strong pitch. Because this time, Toyota is taking the pickup market seriously.