Larry Hutchinson, who this year became the first Canadian president and CEO of Toyota Canada Inc., said his father told him people would always need three things; food, transportation and housing.
Hutchinson, who grew up on a farm near Chesley, Ont., picked transportation.
After a stint at General Motors Canada under a co-op program while he earned a business degree from Wilfrid Laurier University, he accepted a job offer at Toyota in 1986. He’s worked in all facets of the company, from product planning to sales, distribution and marketing.
Hutchinson, 52, shared his views on the outlook for the Canadian market in an interview with Automotive News Canada.
Q: Canadian car and light truck sales reached about 1.9 million in 2015, a third-straight record. Some analysts are predicting a flat market this year. What’s Toyota’s take?
A: “If they were flat over the next two or three years that would be fantastic. Historically the Canadian market has run 1.55 [million] to 1.65 and then it soared in the last two or three years. To me any market that’s over 1.75 million is a really healthy market, and the market we have right now over 1.9 is fantastic. If it stays there, that’s great.”
“I hear a little bit about people saying the market is softening based on May results but May results in our mind were purely because we had one weekend less than last year. The SAAR (seasonally-adjusted annual rate) as we have it was still over two million in May, which is very strong.”
What’s driving these numbers?
“The product that’s available is fantastic, not just from us but from the industry ... interest rates are great. We don’t see them changing for the next couple of years. We think fundamentally they’re going to be very, very low for the foreseeable future.
“It’s true [cars] are lasting longer but there’s a lot of old cars on the road . . . so there’s replacement demand, plus we’re a growing country.
“You talk about utilization per household, that’s also growing in Canada, where historically it was quite a bit lower than the U.S.A. In number of cars per driver it is growing in Canada so you are getting a heavier usage per person of driving age in Canada, so that actually adds to demand as well.”
What’s behind the planned shift of Corolla production to Mexico in favour of building RAV4 at Cambridge and Woodstock?
“What’s key for us as a marketer right now is on the truck side. We need truck capacity. So by building a Corolla plant in Mexico, we can move Corolla out of Canada and increase truck capacity. We’re going to turn that line over to RAV.”
RAV4 is Toyota Canada’s top seller, replacing Corolla. How challenging is it to sell into the softer compact segment?
“We just make sure we have to get our share of that. That’s the Toyota strategy. We’re not going to do things that hurt the brand in the short term to prop up capacity or overbuild supply. That’s not how we do our business. We want to manage that properly to maintain residual values for our customers and brand health for the future.”
What’s Toyota’s view of Canadian auto production in a globalized industry and free-trade deals such as the Trans-Pacific Partnership?
“Toyota’s always been committed to building cars where they sell them, from an economic point of view. But in Canada it’s [also] a great work force. There’s lots of other economics that goes into whether a plant can be successful or not and a lot of those are favourable in Canada, the medical system and all those types of things. So it’s really positive.”
(Toyota Motor Manufacturing Canada builds about 580,000 vehicles in Canada per year, exporting well over half. However, it’s at a disadvantage to NAFTA producers and other non-Japanese imports, which makes TPP or something like it important, Hutchinson said.)
“As much as we get most of our product from North America, we still have to put more resources in, which drains us from other things we’d like to do by offsetting any tariff that exists from Japan, where our competitors now without any production in Canada are going to have an advantage.”
The interview was edited and condensed.