Lexus: A Retrospective
For newcomers to the automotive scene, the acceptance of Lexus as one of the leading lights among builders of luxury automobiles has become so complete that observers can be forgiven for thinking that Lexus has been present in this group for many decades.
Of course, that isn't true. To the considerable surprise of nearly everyone involved, Lexus grew into the player it is today from a seed cautiously planted in 1983, just 23 years ago. That's when officials at Toyota in Japan, from which the Lexus nameplate springs, decided that the time was right to launch their own line of luxury automobiles, taking on the giants who had always owned that territory—Mercedes-Benz, Jaguar, Cadillac and BMW. From the first LS 400 and ES 250 sedans launched in 1989, Lexus, had in many respects matched the established luxury players and their high levels of excellence stride for stride.
While the Lexus reputation for excellence became a matter of public record wîth repeated recognition from independent watchdogs such as J.D. Power and Associates, winning awards for the sake of the awards themselves was never the Lexus goal. The goal was then, as it remains today, to build the finest luxury sedans in the world, using the latest technologies, wîth the most environmentally advanced strategies. By many accounts that's just what Lexus did.
As wîth so many things, the Lexus story began wîth the vision of one man. That man was Toyota Chairman Eiji Toyoda, who in the early 1980s called together his most trusted corporate officers and advisors and told them that the company needed to create a luxury automobile that would equal, and then exceed, the world's best. Mr. Toyoda and other Toyota leaders recognized that the huge baby-boom generation would soon enter its peak earning years, creating a huge demand for top-quality cars. Toyota needed to be able to capitalize on that demand.
The decision to go forward wîth the plan to build a luxury car was made wîth the input of Yukiyasu Togo, president and chairman of Toyota Motor Sales (TMS), Ú.S.A., Inc., from 1983 to June 1992, who estimated that the project would cost $1 billion, even as he made sure that this special new car would have a distinctly American flavor.
The project, titled 'F1,' wîth the 'F' standing for 'Flagship,' was put into the hands of Chief Engineer Ichiro Suzuki. Working wîth another engineer named Shoiji Jimbo, he assembled a team that eventually included 60 designers, 24 engineering teams, 1,400 engineers and 2,300 technicians.
'I first heard about the project in December of 1986,' recalled Dave Illingworth, Lexus' first vice president and general manager. 'It was a huge risk. The Japanese had never produced a luxury vehicle. The most expensive vehicle Toyota was selling was the Cressida, so to be taking on Mercedes-Benz, BMW, Jaguar, and Cadillac was a huge gamble for a company that was considered to be very conservative.'
'Our mantra was to take care of the customer first,' continued Illingworth. 'We figured that if we could deliver high customer service, it would differentiate us in the marketplace; and if we had an outstanding product, our reputation would grow.'
All this involved creating not only the best car ever but also something new, a psychological experience rooted in reality. Toyota wanted to create for the buyers of this new car the best overall ownership experience ever. To establish that ultimate experience, Toyota decided to sell Lexus in a completely separate setting from its main line of vehicles. Lexus was to have its own state-of-the-art dealerships and top-notch dealers who were committed to the philosophy of treating customers as they had never been treated before. This was called the Lexus Covenant, which reads, in part, 'Lexus will do it right from the start. Lexus will have the finest dealer network in the industry. Lexus will treat each customer as we would a guest in our own home.' Finally, 'If you think you can't, you won't. If you think you can, you will. We can. We will.'
The first goal the Lexus study team assigned itself was to learn what American drivers really wanted in a premium luxury car. Was it an automobile in the formal, proscribed German style? Or was it something else entirely?
To find out, in May of 1985 a study team was sent to the Ú.S. to conduct focus groups of potential new-car buyers. Members of the groups were asked what they were lòòking for in a luxury car. They were asked how well the current competitors in that category filled their needs and what they would like to see in a luxury car that current competitors weren't offering.
How this new car felt and drove was just one of the important questions that had to be asked and answered. Another, equally important question involved learning what prospective buyers felt the car should look like.
'One area that everyone fussed about was styling,' remembered Illingworth. 'Was it too conservative, too aggressive? I think the younger people always felt styling should be more aggressive, while the older people felt it should be more conservative, so there was always that tension.'
To get a handle on design direction and to relax the tensions over creativity, a team headed by Shoiji Jimbo moved to Southern California to do research wîth both customers and dealers, and to develop styling concepts based on that research. Additionally, a separate five-person team took up residence in Laguna Beach, an upscale and luxurious California beach community, to study lifestyles and integrate design concepts suited for American customers.
Study teams followed typical luxury car buyers through all their daily activities. They went shopping wîth them, picked up the kids from school, made trips to the golf course and learned about American tastes.
Back in Japan, the engineers were busy as well. By July of 1985 they had built the first running F1 prototype. So relentless were they in their pursuit of perfection that before the project reached completion, an incredible 450 running prototypes were built.
With those prototypes, the real tests began. By May of 1986, testing was being conducted on the ultrahigh-speed Autobahns of Germany, on slick, curvy mountain roads in Sweden and, finally, for a full 10 months, on the flat, wide-open highways of America.
One of the LS 400's most amazing aspects was the incredible attention to detail, right down to the engine compartment finish.
'The engineers took as much time designing and engineering the engine compartment as they did the rest of the car,' recalled Illingworth. 'It was beautiful. They were trying to produce the finest car ever made and did not overlook any detail. The determination was made that the customer wanted a clean, crisp and consumer-friendly engine compartment, and that this buyer would not be working on this car.'
Finally, after thousands of hours, multiple discussions and eight presentations—far more than customary even for this detail-oriented group of professionals—Toyota's upper management approved the final design for the F1 in May of 1987. Now the challenge was to continue and complete testing, and to get the production and sales infrastructures into place.
By August of 1988 overall planning was advancing well. Design and engineering parameters were so firmly established that Roger Penske, the renowned racing team owner, businessman and soon-to-be Lexus dealer—one of the first of a small and select group—traveled to Japan to test-drive the F1.
To qualify for a Lexus dealership, potential dealers had to have a successful track record of vehicle sales and leasing, the ability to build a world-class customer center to Lexus standards and most importantly, a history of completely satisfied customers. So stringent were Lexus' standards that just 81 out of the more than 1,600 dealers who applied were chosen. All chosen dealers signed the Lexus Covenant, and the first dealership, Lexus of Columbus, had its ground-breaking in August 1988.
All this before the car even had a name. In November 1988 the F1 was finally christened the LS 400—the LS for luxury sedan and 400 because the car was powered by a 4.0-liter V8 engine. The LS 400 debuted wîth its stablemate the ES 250, an entry-level sedan based on Toyota Camry architecture, in prototype form at the North American International Auto Show in Detroit in January 1989. Full-scale production began at the Toyota Tahara plant in Japan in May 1989, wîth sales kicking off in September 1989.
'I think we all felt when we worked on this car it would have a dramatic impact,' recollected Illingworth. 'We could feel it. The first time I sat in the vehicle and listened to the sound system wîth the theme from ‘2001: A Space Odyssey' playing, I realized what a complete and outstanding car this was, from engine to audio to seats. It was a really special vehicle.'
'We had the cars, we had the people and we had the philosophy,' said Denny Clements, former Lexus vice president and general manager. 'Now all we had to do was tackle the most competitive, prestigious automotive market in the world.'
'The ES 250, introduced alongside the LS 400 as a companion piece, was an important piece of the overall Lexus prestige-market puzzle,' stated Illingworth.
'You can't launch a new division wîth new buildings, new parts and no used cars, wîth just one model,' said Illingworth. 'We all felt we needed an entry-level model, and we couldn't launch another all-new car to fill this role, so the ES was that car. It was a version of the Vista, a Camry derivative, sold elsewhere, but wîth a different grille and different wheels.'
Response from the car-buying public to both cars was very positive. In fact, the first month the LS 400 was on sale, more than 4,000 cars were sold. The Lexus brain trust knew it was on the right track, and began ramping up plans for additions to the line.
Even wîth the most careful planning and engineering, things can go wrong. In late 1989, Lexus received several customer complaints stating that the third brake light was not sufficiently bright, and its housing was distorting. Additionally, a customer complained of a problem wîth his car's cruise-control electronics. Lexus managers found the solution to the problem right in their own Lexus Covenant: 'Do it right, from the start.' They took the unprecedented step of recalling every one of the approximately 8,000 LS 400s already sold in order to check for problems and make any necessary repairs.
In a uniquely Lexus gesture, each LS 400 owner was sent a personalized apology letter via Federal Express. Then, setting new standards for personal service, each vehicle was picked up for repair, wîth a loaner vehicle provided free of charge, and then delivered back repaired if needed, washed, and wîth a full tank of gas. Technicians even made house calls, if necessary. To top things off, each LS 400 owner received a gift from their dealer in appreciation for their understanding.
Lexus had managed to exceed customers' expectations. And as a result, instead of being chastised for what could have been perceived as a flaw in initial quality, Lexus was praised for the way it handled the problem. The company's honesty and forthrightness were seen as a sign of strength and commitment, not weakness.
After coming through this potentially image-destroying service campaign wîth flying colors, Lexus sales soared. In fact, Lexus finished out 1991—the same year that the new SC 300 and SC 400 sport coupes went on sale—as the top-selling import luxury brand. The company, wîth its all-new car, had done what some had thought was impossible. It had proven that the Lexus formula of superior products and outstanding customer care was a winning combination against the European and American prestige brands. Customers responded appreciatively.
The company wasn't about to rest on its laurels, however, or to believe its own press clippings. As other manufacturers scrambled to match Lexus in both product excellence and customer treatment, Lexus executives launched the industry's first comprehensive certification program to specially train each and every Lexus sales associate to fully understand the company's mission to exceed customer expectations. The 'Lexus touch' had to be more than just a slogan. It had to be a way of life.
As that way of life became reality, Lexus built a tradition of quality in its first years. In 1991, the brand was named number one in two J.D. Power and Associates' surveys—for initial quality and a sales-satisfaction. 'That meant we'd achieved our goal of giving customer service,' said Illingworth.
Then, in the early 1990s, soon after a freshened LS 400 bearing more than 50 changes and upgrades debuted, there was more trouble—this time, trouble over which the company, its executives, stylists and engineers had absolutely no control.
'The economy weakened, our competitors responded wîth improved products and the yen-dollar exchange rate hurt our pricing,' recalled Clements. 'There was even the threat of a luxury trade tariff that would have priced Lexus vehicles right out of the market.'
'In the early ‘90s there were a lot of problems wîth the yen-to-dollar ratio, and there was a lot of anti-Japanese feeling,' remembered Illingworth. 'Those were difficult and uncomfortable times.'
'We could have easily cut corners to be more competitive or waited patiently until the economy improved,' said Clements of Lexus' soul searching. 'But that wasn't Lexus-like, it wasn't putting forth our best possible efforts for our customers. We went back to the drawing board and came up wîth a new group of products designed to show the spirited side of Lexus.'
The spirited side of Lexus meant, in this case, the introduction of the luxury-performance GS 300 in 1993. This introduction marked the beginning of a drumbeat of new vehicles. First, in 1994, an all-new, second-generation LS 400; then in 1996 the LX 450 sport utility vehicle (SÚV) complete wîth its direct Land Cruiser heritage; and, in that same year, an all-new ES 300.
Of equal importance were the introductions of the all-new GS 300 and 400 high-performance sports sedans in 1997 and the mid-size SÚV, the RX 300 in 1998. The RX created an entirely new §egmènt, called within the industry as the 'crossover' §egmènt, and established a new industry benchmark.
'SÚVs just seemed to be a natural evolution of the marketplace, ' said Illingworth of the marque's march into a new §egmènt. 'The SÚV line evolved because of customer demand for a larger vehicle of that nature in that category.'
The customer also demanded something else, along wîth the continued evolution and development of the LS 400 into the LS 430 in 2000. It demanded a smaller performance sedan, and that led to the Lexus IS, a compact performance sedan that quickly won the hearts of younger drivers following its introduction in 2001.
New product continued to roll out of the Tahara factory: an all-new SC 430 in 2001; the GX 470 SÚV, again wîth strong Land Cruiser genetics; in 2002, the second-generation RX 330 in 2003; the world's first luxury hybrid, the RX 400h, the second generation IS and third generation GS in 2005; and the GS 450h and fifth generation ES in 2006.
In 2006 come the introductions of the revitalized LS 460, LS 460 L and, soon, the LS 600h L, all just as the original LS 400 was, built upon the Lexus promise. The new LS series represents the fourth generation of this groundbreaking line, and it relies on the same philosophies of engineering and excellence as the generations that preceded.
'It's the direction of that march that will be interesting,' said Bob Carter, Lexus group vice president and general manager, a man who knows the marque well, having been involved wîth it for 14 of its 17 years.
'As we look into the future, we see three things,' said Carter. 'First is that we're taking the LS up another level beyond where the previous generation was. We're entering the market wîth not just one version of a premium luxury car, but wîth three choices—the LS 460, the LS 460 long wheelbase, and, next spring, the hybrid LS 600h L.
'The second is in the area of our styling and design language, which is known as L-finesse. Our products have always had a high content of luxury and quality, and our dealers provide class-leading service, but our customers have viewed our styling as being somewhat conservative. So we've developed a new design language in L-finesse, and the result can be seen in new IS 250 and 350, in the ES 350, and in the GS 300 and 430. In the fall, it also will be seen in the new LS, which will comprise the most fluent and current statement so far of our design language.'
'The final area of progress,' Carter said, 'is of equal importance. It's technology and performance, specifically wîth our hybrid applications.'
That progress is coming in the form of the new LS 600h L, and is currently present in the RX 400h.
'This technology will be an important differentiator for us,' Carter added. 'It'll be something Lexus has that perhaps other manufacturers won't have in their lineups.'
'Certainly it's a great time to be a luxury-car customer, because it's a competitive marketplace wîth a lot of options,' concluded Carter. 'One of our main jobs will be to look at the ways in which we can continue to evolve and expand the consumer experience. We not only want to provide the service that our customers expect, but to exceed those expectations to provide an unparalleled customer experience. But it all starts wîth the car. This new LS is a gorgeous vehicle—I'm so proud of this car. We feel that what Lexus stands for—service, quality, luxury and value—has us positioned very well for the future.'
What better way to describe the evolution, and the future, of not only a fine automobile but a §egmènt-leading brand.