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Whenever Denny Clements, Lexus' General Manager speaks, we at IS300.NET listen, for his words are not mere rumors and wishful thinking. He has just given what we feel is his most candid and informative interview yet to Mark Rechtin of Automotive News, and it just appeared on their sister publication Autoweek. Among the choicest tidbits:While Lexus will not go any further downmarket than the IS 300 sport sedan, the next generation will offer several versions when it arrives in fall 2005. And Lexus also will take a page from the Germans by creating a performance division similar to Mercedes-Benz's AMG unit and BMW's M brand.<P>

Here is the article in its entirety:<P>

How high is high enough? How big is too big?
Those are the questions facing Lexus Division, which won the best-selling luxury brand title for the fourth straight year in 2003. It also has accumulated more J.D. Power accolades than any other luxury brand, boasts the industry's highest sales per dealer and is among the leaders in dealer profitability.
But Denny Clements, Lexus general manager, says the brand has fallen into a predictable rhythm - and he wants to change that.
"We launch a car, then have a minor change after three years, and then a redesign two years after that," Clements said during an interview at the Detroit auto show.
"Meanwhile, the Europeans have new product news and variations coming every year, and they're always on magazine covers. Lexus needs to be like that. Lexus needs to have something always going on. It needs to have that buzz." <P>

Clements said Lexus and parent Toyota Motor Corp. have set this stir-things-up agenda for the next few years:
A new distinct design specific to Lexus, to be seen first in the 2005 GS 430 and evolving from there.
A redesign of each car line by spring 2007.
All-wheel drive availability with the redesigns.
The addition of a flagship above the LS 430.
The creation of a factory performance division, akin to Mercedes-Benz's AMG. <P>

Except for the launch of the RX 400h hybrid sport wagon late this year, the next 12 months will be static in terms of product. But in early 2005 the spigot will begin opening wide. After spending the last several years bulking up in SUVs, Lexus is returning to its core strength: luxury cars. The next-generation GS 430 and GS 300 sport sedans, which will arrive in early 2005, will be followed by the replacements for the IS 300, ES 330 and LS 430, all arriving by spring 2007.
Jim Press, COO of Toyota Motor Sales U.S.A. Inc., says most Lexus growth will come from the lower end of the lineup. While Lexus will not go any further downmarket than the IS 300 sport sedan, which starts at $29,980, he said the next generation will offer several versions when it arrives in fall 2005. The IS 300's current volume of 1,000 units a month comes from just two derivatives, a sedan and an all-but-ignored wagon.
"The key to volume growth is the IS 300," Press said at the Detroit show. "It's in a price category where having volume is OK. It's feeder stock for future Lexus purchases." <P>

Clements promises the IS 300 replacement will do a better job competing against the BMW 3 series and its 16 variants, which sell about 10,000 units a month. "We'll have a sedan, coupe and convertible, all-wheel drive and a couple of engine choices," Clements said. "It's a huge opportunity. Right now the IS 300 has a cult following, but we could be doing 5,000 or 6,000 units a month."
That kind of volume growth would extend Lexus well past the 300,000-unit mark, which consultant Eric Noble of The Car Lab in Orange, Calif., warns is a danger point. "They are risking dilution of the brand," says Noble. "There is no evidence that a luxury brand can sell more than 250,000 units sustainably. That Lexus, Mercedes and BMW are all flirting with the cliff edge doesn't make it any safer a place." <P>

At the Tokyo auto show last year, Lexus unveiled a new look that it calls its own design language. No longer will Lexus vehicles be rebadged versions of Japan-market Toyotas. The first vehicle to show the new look will be the 2006 GS 430 and GS 300. "The design will not be cookie-cutter, but there will be similar cues across the line," Clements said. To critics who pan Lexus styling as bland, Clements says, "Vanilla is the best-selling ice cream. But we'll have some other flavors, too."
Lexus also will have dedicated engineering teams from now on, not transferees from a Toyota vehicle project reassigned to do a more upscale Lexus version. Toyota and Lexus product development teams will compete against each other to create the best vehicle. <P>

"Whatever products we need, we'll get," Clements said. "The product planners, designers and chief engineers now are all Lexus-dedicated. There will be more performance, bigger and better wheels, things like that." <P>

But while Clements predicts big things for the GS 430 and IS 300 replacements, no vehicle gets him more emotional than the pending redesign of the LS 430. It is more than just a redesign of Lexus' flagship. He promises that the new version "will be 1989 all over again," a reference to the splash Lexus made at its debut. <P>

"It will make the same impact as the original," Clements said. <P>

George Peterson, president of the AutoPacific consulting firm in Tustin, Calif., says the next Lexus flagship needs to make that kind of impact. <P>

"The LS 430 scores at the top of the list of all our surveys," Peterson says. "It does everything as well or better as customers expect. But it doesn't have that passionate visual appeal. If Lexus is going to deliver on a more passionate appearance, then the LS 430 is the place to go." <P>

Clements foresees future Lexus vehicles offering programmable vehicle-dynamic software. He believes drivers will pay a premium for a vehicle that can be adjusted to perform according to a driver's mood. That means a Lexus owner could drive a road rocket one day, a grand tourer the next and a luxury cruiser the day after that - all with the touch of a button or switch. Although the technology sounds like a long shot for the next-generation products, Clements believes software is advancing fast enough to make it possible. <P>

"If we add technology, it needs to be intuitive and something Americans don't want to have to work at to enjoy," he said. "Americans don't read owners manuals, and they don't want three-hour seminars to learn how to use their car." <P>

Lexus also is moving to adopt awd. Clements concedes that the brand has lost customers in the snow belt by not equipping its cars with awd. Executives also confirmed that a long-rumored super-luxury Lexus is closer to reality, a model that would go up against sedans such as the Mercedes S600 and BMW 7 series. Executives are mum on whether that means a hybrid powertrain, a stretched wheelbase for the LS 430 or a V-12 pulled from the Japan-market Century. But it is clear that the car will happen. <P>

"It's not an issue of if, but when," Press said. "We just need to work out the business case, development cost and volume estimates." <P>

Lexus also will take a page from the Germans by creating a performance division similar to Mercedes-Benz's AMG unit and BMW's M brand. Lexus' first attempt, the L-Tuned accessories line, was aborted last year because it mostly offered appearance add-ons that had little to do with performance. Clements said the next iteration will be better. <P>

"An AMG-type sub-brand is coming," he said. "We have to have those image products." <P>

Susan Jacobs, president of luxury brand specialist Jacobs & Associates in Rutherford, N.J., agrees that Lexus is on the right track by working to expand its product lineup and technical base. <P>

"One of Lexus' major drawbacks has been a very limited lineup, primarily in terms of body styles and powertrain options," she said in an interview last week. <P>

"There were pockets of luxury buyers that went to the German makers that Lexus didn't and couldn't appeal to. <P>

"The major strength for Lexus going forward will be the greater variety of product and greater functionality, such as all-wheel drive." <P>

But for all the near-term changes, Lexus bosses are not about to forget what got them to the pinnacle. <P>

"We can't lose sight of the fact that Lexus is, first, a luxury car," Clements said. "We're not here to reinvent ourselves. We just sold 260,000 vehicles to people who love our products."
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