SAO PAULO (Reuters) - Toyota Motor Corp (7203.T) is gearing up for Brazil's battered auto market to return to growth in 2017, after a four-year crisis halved overall vehicle sales, the automaker's top executive in Latin America said.
Yet Steve St. Angelo - who has tripled Toyota's market share in Brazil during the crisis - says he is losing sleep over one scenario: what if the market comes back too quickly?
"If that volume comes back, how do we keep our market share?" said St. Angelo, head of Toyota in South and Central America and the Caribbean, in an interview ahead of this week's Sao Paulo Auto Show.
"We don't have the production facilities. Are the dealers prepared for that kind of volume? The short answer is: I worry about it," he added. "This is what keeps me up at night."
Toyota sold nearly 148,000 cars and light trucks in Brazil in the first ten months of 2016, up 1 percent from a year earlier, moving to fifth place in the Brazil market from eighth just a few years ago.
St. Angelo, who credits meticulous customer service for keeping loyal customers during the downturn, has the enviable problem of contemplating a third shift at Toyota's plants in Brazil, while rivals are using less than half of their capacity.
Toyota has avoided the widespread layoffs that cut 25,000 jobs from the Brazilian auto industry in two years.
Across Latin America, the Japanese automaker has become a outlier under St. Angelo, doubling down while other carmakers pulled back amid economic crises in Brazil, Argentina and even Venezuela.
So far, the strategy has won a larger slice of a shrinking pie. Toyota forecasts growing sales in core markets of North America, Asia and Europe, but an aggregate drop in markets such as Latin America, Africa and the Middle East, raising questions about return on investments there.
An $800 million expansion of a Toyota factory in Argentina looked like folly to many in 2013, with the country on the verge of its second default in a dozen years.
"When I announced that, some suppliers and competitors called to ask me, 'Steve, are you crazy?'" said St. Angelo.
Yet the economy has stabilized under new President Mauricio Macri and Argentina has become an export hub for Toyota. It is already using half of its new capacity at the Zarate plant.
Brazil is unlikely to make such a swift turnaround, according to St. Angelo, as high interest rates and unemployment continue to weigh on demand.
An export-driven rebound would also be a stretch for the Brazilian industry, he said, given the inflexible labor laws, poor transportation infrastructure, huge tax burden and weak supply chains that push up costs compared to global competition.
Toyota opened its third Brazilian car plant at the peak of the market in 2012, making the newly launched Etios subcompact. It employs more than 5,500 people in Brazil.
But manufacturing costs are one reason Toyota has held off bringing its subcompact SUV crossover C-HR to Brazil, where Honda Motor Co (7267.T) has found a hit with its locally made rival HRV.
"There are no plans to bring C-HR to Brazil. We even looked at manufacturing here, but it was just too expensive," said St. Angelo.
Still, Toyota is bringing a C-HR concept car to the Sao Paulo show this week to gauge interest, St Angelo said. A Yaris concept car at the 2015 Buenos Aires Auto Show stirred enough interest to start importing that car to Argentina, he added.
Instead of launching new models in Brazil, St. Angelo said he is focused on expanding a network of dealerships that can provide the customer service he credits for Toyota's recent success.
Maintaining service standards at an expanding network of dealerships can be as difficult as ramping up assembly lines, he said, citing a recent slip in customer satisfaction at Argentine dealerships that he quickly addressed.
St. Angelo also expects Toyota's patience to pay off sooner or later in Venezuela, where the company has held on to workers despite a ravaging economic crisis that dropped new car sales from 600,000 per year to around 10,000 per year.
To test its cost-cutting ability and keep its factory open, Toyota even repurposed a Venezuelan assembly line to make parts for export to Argentina.
"It was a breakthrough for us ... and I'm not ending there. I'm challenging them," he added. "Can you get competitive so maybe one day they can export to Cuba? Why not?"
Reporting by Brad Haynes and Daniel Flynn; Editing by Chris Reese and Mary Milliken