Saturday 25 November 2017

Petrol head: Toyota Ireland and Steve Tormey on the advantage line

Steve Tormey was a standout rugby player who went on to head up Toyota Ireland. He spoke to Donal Lynch about how it weathered the recession

Steve Tormey
Steve Tormey
Donal Lynch

Donal Lynch

It's looking like the motor industry in this country has weathered the storm. Sales for the year to date are 25pc up for the first six months of the year, the Society of the Irish Motor Industry (SIMI) statistics have trumpeted.

New car sales are currently running at 82,337 so far this year. Commercial sales are doing even better - in what is seen as a real omen of the more general economic recovery. They were up by 52pc (801) on June 2014 (528) and are 56pc ahead (14,600) for the first six months of this year.

You would imagine this would all warm the heart of Steve Tormey - who, on January 1 of this year, was one of a trio of men who took over the leaderships of Ireland's biggest motor brands (Lar Himmel at Volkswagen and Ciaran McMahon at Ford were the other two). But he's sounded a note of caution, warning that many dealers are inflating the figures sold by registering cars that are, in fact, are languishing in forecourts.

These almost-new cars, selling at close to full price, create confusion for customers, he says. Toyota has endeavoured to avoid this, he adds, because they're as concerned with managing the delicate equilibrium between new and used cars as they are with shifting new units.

"We want to make sure that the cars hold their resale value somewhat, and that the residual market remains strong - because the contract we have with the customer and the dealer is that when you trade it in, there's value to doing that."

He's bullish about Toyota's prospects as the recovery gathers momentum and estimates that the total car sales for this year will be around 110,000. He thinks Toyota should gain a significant chunk of that.

"Our market share is around 11pc, but the retail market share is a relatively high proportion of this for us. So as that particular aspect improves, our market share should improve further."

Most motor industry people wear the perpetually hunted look of someone who's been to war - and Tormey, a former rugby player, is no different. Perhaps only the construction industry saw the bottom fall out of things with quite same momentum.

"Before the collapse, we had a roughly 15pc market share," Tormey recalls. "If you look back at car sales, I'd reckon 2007 was the biggest year we ever had - besides 2000. The number plate change drove growth that year and it was a one-off with some 235,000 cars sold. But in 2007 there were 186,000 cars sold, which was really huge.

"In 2008, there was 150,000 - but just a year later it was down to 58,000. Cars are a luxury. Nobody needs a new car, and it looked very much like the man on the street held on to his car."

The plunge into the red was caused partly by regulatory changes, which were introduced, with spectacularly bad timing for the industry - just as the recession was taking root. Cars moved from a taxation system based on engine size to one based on emissions.

"That bumper year - 2007 - was predominantly petrol cars," Tormey says. "They brought in the CO2 legislation in 2008 and it wasn't a huge surprise because we had made submissions to them, but we didn't think it would be 100pc in favour of diesel cars. In July 2008 the tax system was changed to favour diesel cars and everyone wanted them, even if they didn't suit their needs.

"So, for instance, people doing low mileage in cities were buying diesel. You still have harmful emissions from diesel cars and in a number of countries they are now thinking of curtailing the use of them - again, through taxation."

For Tormey and his team the nadir might have been one fraught weekend in 2009 when they worked around the clock to get unsaleable cars to England.

"We had to do a deal with the parent company and get the cars to the UK, where cars are spec-ed a little differently," he recalls. "They had a need and we needed to get rid of cars. But if we'd waited a month they'd have resupplied themselves. We had this 72-hour window where they said: 'Right, a boat is coming.' This was on a Friday and they were coming on a Monday.

"I went and did it myself in the overalls. Not just me. Other directors and staff too. I did think during that time: 'How did I end up here?' But it also bound us all together in the crisis."

Another huge issue during this period was that dealers had made huge investments in premises, which had been driven in part by a need to come up to new standards as part of EU trading legislation for the car industry, known as Block Exemption rules.

"We stuck with the dealers, we knew that some of them got into trouble with investments they had made in premises and so forth," he says. "Thankfully they have come out the other side in good shape. We did lose a couple of dealers who had interests outside the motor industry."

Tormey says he can't comment on the ongoing court action in which a number of car dealers claim they are being discriminated against in relation to the criteria for appointment as authorised repairers for Toyota.

Fifteen outlets around the State, including Cranley Cars, Linders, Murphy & Gunn, Fitzpatrick's and Kearys, are claiming Toyota Ireland is acting in breach of competition legislation in stipulating certain requirements.

Toyota disputes the claims.

In 2010, Toyota was involved highly publicised global recall involving millions of its cars. The make's image as "the best built cars in the world" took a battering though Tormey says that the poor management of the crisis was party a function of Eastern reticence meeting Western media demands.

"The culture in Japan was such that they were definitely blindsided by how the Western media reacted to that recall. The chain of command wasn't ready to answer all those questions immediately." Tormey is careful to point out that independent testing in Germany has shown that Toyota is still the most reliable car on the market.

The relationship between East and West is something that he is adept at managing. Toyota in Ireland is a family-run business. Its strong market share undoubtedly gives it a voice on the Japanese mothership - but it's not directly involved in R&D or production.

In contrast to other brands which have wholly owned subsidiaries, it doesn't have access to an in-house banking arm to finance deals. It instead focusses on getting the right products to the Irish market and managing the company's image locally.

This would seem to be second nature to Tormey, who honed his own skills in the marketing powerhouse of Guinness and learned the value of being a team player from his years on the rugby pitch. He was a standout player for Old Belvedere, was capped 20 times for Connacht, and also played for Leinster.

"The interconnectedness of rugby is a great analogy for business," he tells me. "Some guys are fast, some guys are agile, some guys are strong."

Connections help too and Tormey's were impeccable. His father-in-law was the late Tim O'Mahony who took over the Toyota franchise in 1974 from the late Stephen O'Flaherty, who had it for the previous two years.

Over the years O'Mahony (also a great sportsman, having been a dual star for Dublin and Cork), had urged Tormey to come work for Toyota - but the younger man had always demurred.

"I did an internship at a dealership during one summer while I was in college," Tormey recalls. "But after I left college I wanted to do my own thing. I certainly didn't want to go working for the father-in-law! Over the years he asked a number of times."

Instead, Tormey went to work for Guinness, becoming their youngest sales rep at the time. He played rugby for Galwegians too (managed at that time by Warren Gatland) when his work took him West.

He eventually did take up O'Mahony's offer and tells me that the contrast in marketing slickness between the company he left and the company he joined was not as great as you might think.

"Of course Guinness put an awful lot of money into advertising and marketing but Toyota has done well on that score over the years too." He points out that in the 1970s the company advertised in Ireland as Gaeilge and its sporting sponsorships, particularly its relationships with the GAA and Munster rugby have been hugely successful.

The lesson of the last few years, Tormey says, is that businesses must become more prudent about future-proofing themselves and learn to be more alert for trouble when it appears on the horizon.

"When it's not happening in terms of demand, people come up with excuses very quickly," he says. "January and February of 2008 were the biggest in history of industry but when the drop off began I heard all sorts of strange excuses."

He tells me that listening to a more realistic voice may have been what saved Toyota's bacon.

"It was during 2008 and I met Tony O'Reilly at a function. He was asking how was business. I said it was okay, except for the CO2 changes and all of that.

"And he looked at me and said: 'What we're about to go into the world has never seen before so do your best to hold on to your business.'

"I kind of looked at him for a second because I thought that was a rather drastic statement. But I thought about it later and took it to heart. I certainly would have ordered more cars but for that conversation."

The future, Tormey thinks, may be driven by fuel cell cars but the changing landscape of emissions legislation and consumer need will decide what the new state of the art is.

"Don't forget, you still have harmful emissions from diesel cars. We're always looking for a solution - and it could be that the hybrid is it. They have low CO2 which the Government want to protect the environment, but also for humans they have low or zero NOx (nitrogen oxide). The Government have shown favour towards those too.

"Petrol, diesel, petrol turbo, petrol hybrids, electric vehicle and fuel cell vehicles... they're all in the mix. It will be interesting to see over the next few years which is the Betamax and which is the VHS. But whichever one it is, we will be there."

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