Driving Forces: Toyota's Olympic Turn

When Toyota took the track at the Daytona 500 in February it fueled a high-octane controversy. The good ole boys of NASCAR railed against the deep-pocketed Japanese automaker running roughshod over stock-car racing just as it had driven Detroit off the road (never mind that Chrysler, which races Dodges in NASCAR, was German-owned at the time). A General Motors worker even created a Web site entitled "Fans Against Racing Toyotas." (Yes, the acronym is FART). The blowback against Toyota, though, died down after it failed to win a single race. But Toyota scored an even more significant victory off the track: it overtook GM to become the world's largest automaker. And now, Toyota might soon replace GM in another iconic role: official automotive sponsor of the U.S. Olympic team. "Toyota has an obsession with becoming America's car company," says Peter De Lorenzo, author of the forthcoming book "The United States of Toyota." "After NASCAR, grabbing the Olympics would be the next logical step."

Toyota's Olympic moment arrives thanks to an abdication by GM. After 24 years of sponsoring the U.S. Olympic team and a decade sponsoring NBC's coverage, GM is exiting the games after the flame is extinguished in Beijing next summer. GM says it now believes it can spend its money more wisely by targeting its marketing more narrowly, to, say, the Internet, or by spending some of those Olympic dollars developing new models. And after losing nearly $13 billion in the last two years, GM is in no position to sign on for another $1 billion, 10-year Olympic deal. "We do feel the high cost of entry to be an official Olympic sponsor is not the most efficient way to spend our marketing dollars," says GM spokeswoman Ryndee Carney. Besides, affixing those magic rings to its ads didn't exactly transform GM into a champion: Since 1997, GM's share of the American auto market has fallen faster than a Chinese platform diver, from 31 percent to 23 percent today. Says De Lorenzo: "The Olympics just didn't deliver for GM."

For Toyota, though, the Olympics could be golden. And it certainly has the gold to afford it. It made a record $13.7 billion last year and expects to earn even more next year, as it leaves GM in its rearview mirror. "This is a slam dunk, a no-brainer," says marketing pro Gene DeWitt, who worked with GM and Coke on Olympic sponsorships. "Toyota should make it their biggest promotion of the year and they would sell a lot of cars."

For now, the automaker's marketers says they aren't going after the Olympics. But they certainly aren't ruling it out, either. After all, Toyota has doubled its sponsorship activity in the past year and already has its toe in the water by backing USA Swimming and American Olympic swimmers like Kaitlin Sandeno and Aaron Peirsol. (It also doesn't hurt that Toyota's American president, Jim Press, is an avid swimmer.) "We advertise a lot on NBC, and we do a lot of sports sponsorships," says Toyota spokeswoman Cindy Knight. "You could logically draw a line" to the Olympics.

But here's the real deal-maker: the pitch from the U.S. Olympic Committee plays directly to Toyota's American aspirations. "This is an opportunity to be associated with the one team in America than everyone can agree on," says USOC spokesman Darryl Seibel. "This is the one team America can rally around and unite behind."

Back home in Nagoya, Toyota's top execs still have painful memories of Japan-bashing in the 1980s, when unemployed U.S. autoworkers took sledgehammers to Japanese cars and assaulted Asian-Americans. The company's brass harbor deep fears of another backlash, which they can ill afford since Toyota now sells more cars in America than in Japan and makes 60 percent of its profits here. That's why going native has become a cornerstone of Toyota's American strategy. It has spent millions marketing its red, white and blue bona fides, with ads trumpeting its 10 U.S. factories pumping out a million vehicles a year and employing 33,500 workers. (Somehow, those ads fail to mention that Toyota still imports more cars to America than it builds here). And last year, Toyota opened a pickup-truck plant in Texas and it's building an SUV factory in Elvis country—Tupelo, Miss. By sprinkling factories throughout the South, Toyota is gaining powerful allies like Mississippi Gov. Haley Barbour, who called the Japanese company "the world's premier auto manufacturer."

By wrapping itself in the Olympic and American flags, Toyota could seal the deal with car buyers, who've already vaulted Toyota past Ford into second place in sales in the U.S. market. "For Toyota, the Olympics could be a better deal than for anyone else," says Global Insight auto analyst John Wolkonowicz. "Toyota wants to convince people that they're not buying a Japanese car, they're buying an American car."

That argument certainly didn't convince NASCAR Nation. But the prospects for an anti-Toyota backlash seem more remote among the Olympic faithful. After all, Toyota would not be the first foreign company to sponsor America's Olympic athletes. Panasonic (Japan), Samsung (Korea) and Omega (Switzerland) are already USOC sponsors. And Olympic fans, who only come together in front of the TV every two years, aren't as single-minded as the red-blooded, middle-American stock-car fans who've turned NASCAR into the country's No. 1 spectator sport. "Any time you attach yourself to Team USA, there's always an opportunity for a backlash," says Toyota marketing spokesman Chad Harp. "But not nearly as much as with NASCAR … There's still a lot of people who don't want a foreign manufacturer competing in what's seen as an all-American racing series."

But it probably won't cause a stir if NBC remodels its set so Bob Costas can deliver Toyota Olympic Moments rather than Chevrolet Olympic Moments. And the U.S. equestrian team isn't likely to bolt if Lexus rolls up big as its sponsor. The fact is, most Americans already consider Toyota part of the landscape. That's why the Camry is America's No. 1 family car, the Prius our favorite hybrid and Lexus the top-selling luxury line. For Toyota to embrace America's Olympians would only seem like it is returning the favor. Perhaps the most persuasive indicator that Toyota is destined to become America's automotive Olympic sponsor is how GM war-gamed its exit strategy. As the General's marketers debated ending a quarter century of Olympic support, they paused to contemplate the most likely fallout: that Toyota would replace them. "That possibility was considered when this decision was made," admits GM's Carney. Given the fragile state of its finances and the nascent nature of its turnaround, GM gave up the games. And now the torch can be passed.