Toyota Motor Sales is trying to cut out the middleman in its relationship with area car dealers, a controversial move that some dealers say could result in lower prices for their customers.

The target of Toyota's plan is Mid-Atlantic Toyota Distributors Inc., a Glen Burnie, Md., company that for 20 years has been the sole distributor of Toyota vehicles to dealerships in the District, Maryland, Virginia, Pennsylvania, Delaware and West Virginia.

Under Toyota's new arrangement, which would take effect in October, the manufacturer would sell cars directly to Toyota dealerships.

Mid-Atlantic Toyota, a subsidiary of Frederick Weisman Co. in Glen Burnie, has filed suit in federal court in Baltimore to prevent the takeover. But Toyota Motor Sales, based in Torrance, Calif., has filed a countersuit in Los Angeles Superior Court seeking to enforce its right to take over the distributorship under terms it says were spelled out in a 1987 agreement signed by the two companies.

Several area dealers said they favor the elimination of the middleman arrangement and believe the move could significantly affect the pricing of Toyota vehicles in the Washington-Baltimore area.

"In basic honesty, to do business directly with Toyota would be a 1,000 percent improvement for us," said a Maryland Toyota dealer, who asked not to be named. "The fact is that MAT {Mid-Atlantic} charges a tariff on the vehicles it sends to us, which makes us less competitive with dealers selling outside of the MAT area. We think we could knock $300 off of our prices without MAT."

A local auto trade official familiar with dealers' views said that private distributor arrangements add costs to cars, "which the dealers almost always pass on to consumers."

Mid-Atlantic is one of three remaining privately owned Toyota distributors in the United States. The others already have been eliminated as the automaker finds itself less dependent on the system it put in place when it was first getting a foothold in the United States.

Private distributorships such as Mid-Atlantic contact and sign up dealers, help with marketing strategies, arrange Toyota shipments and often have determined the numbers and kinds of vehicles Toyota dealers would get.

Toyota Motor Sales, Toyota Motor Corp.'s chief operating arm in the United States, said it signed contracts that allowed it to retain the right to cancel those private distribution agreements.

"MAT should not be surprised at all that we are exercising this option," said James R. Olson, vice president of government affairs for Toyota Motor Sales.

Olson said that his company attempted to cancel its private distribution contract with MAT in 1987. But MAT "put a lot of political pressure on us" in the Maryland legislature and in Congress to keep the contract in force for another five years, Olson said.

A part of that agreement, however, stated that Toyota Motor Sales could take over MAT's distribution operations on Oct. 1, 1990, if it paid MAT a premium for early cancellation of the contract. According to a copy of that accord provided by Toyota, it agreed to pay MAT $137.50 per vehicle sold in the MAT region in the remaining two years of the contract.

Based on MAT's current sales pace, the buyout for the remaining years of the contract would "amount to well in excess of $20 million," Olson said. Toyota Motor Sales intends to keep as many of MAT's 500 employees "as possible," Olson said.

Paul Strain, MAT's lawyer, accused Toyota Motor Sales of breaking its contract in a bid to take over a now-lucrative sales area for Toyota vehicles.

MAT now distributes $1.2 billion worth of Toyota products, representing 9 percent of the value of all Toyota vehicles and parts sold in the United States.

"What Toyota did was to use private American distributors in its early years to get a foothold in the United States, and now that they have it, they are giving us a pink slip," said Strain.

Mid-Atlantic was founded by Frederick R. Weisman, a Maryland entrepreneur and art collector, who figured that the Toyota Corollas, Coronas and Carinas coming to American shores in the late 1960s could be hot sellers. Weisman's hunch paid off, eventually giving him a business with sales in excess of $1 billion a year. Weisman, 78, also owns a real estate and an insurance company.


Los Angeles region.......16.5%

Southeast Toyota.........14.6

New York region..........11.7

Mid-Atlantic Toyota.......9.0

Cincinnati region.........8.3

Gulf States Toyota........7.9

San Francisco region......7.5

Chicago region............7.0

Boston region.............5.2

Denver region.............4.7

Portland region...........4.5

Kansas City region........3.2

SOURCE: Toyota Motor Distributors Inc.