Thursday, December 28, 2006

Toyota is poised to topple GM

Saturday, December 23, 2006
Itsuo Inouye / Associated Press
Toyota is poised to topple GM
Automaker is treading lightly as it creeps up on GM, saying it is more concerned with results.
Martin Fackler / New York Times

TOKYO -- Toyota Motor Corp. said Friday it plans to sell 9.34 million vehicles next year, a figure that analysts said would put it ahead of troubled General Motors Corp. as the world's largest auto company.

Toyota reported global group sales this year of 8.8 million cars and trucks, below GM's 2006 sales forecast of 9.2 million vehicles. But the figures released Friday showed the two rival car giants on starkly different trajectories, with Toyota expecting to add a half million vehicle sales next year, at a time when GM is shuttering plants and laying off workers.

Surpassing GM would be a crowning achievement for Toyota, a company that got its start in the 1930s by reverse-engineering GM and Ford cars, and that spent decades catching up with Detroit. It would also end GM's 81-year reign over the global auto industry, and mark another step in the rise of Asian carmakers.

However, becoming the global leader would also have its pitfalls for Toyota, analysts warned. The Japanese automaker could become a victim of its own success and follow GM's decline if it grows complacent, or lets quality control slip amid its rapid expansion, analysts said. Being at the top could also make Toyota a fatter target for critics, particularly in Congress, where the company's rise could fan a protectionist backlash, analysts said.

"Does being No. 1 matter? It matters for GM, and for America," said Hirofumi Yokoi, an auto analyst at CSM Asia. "It becomes a political issue when America gets passed in a core industry. Toyota will have to be even more sensitive and cautious in the U.S. market."

Toyota's emergence as No. 1 would also realign the global auto industry. The Japanese car company would become the new industry benchmark, say analysts, and one that would be tough to match. While GM's strength in recent years has been its finance arm, Toyota's success is grounded in its formidable manufacturing prowess. As the world's most profitable carmaker, it also has the cash to invest heavily in new technologies and products, analysts said.

Analysts also said reaching the top would not exhaust Toyota's opportunities for growth. They said Toyota will continue to gain in the American market, where higher gas prices have increased the popularity of smaller, more fuel-efficient vehicles. They said Toyota was expanding in developing markets, particularly China, and into alternative-energy vehicles, like hybrid and fuel-cell technologies.

Toyota's rise would also prove a victory of sorts for its unique corporate culture, the so-called Toyota Way, which is rooted in an obsession with craftsmanship and constant improvement, or "kaizen." Analysts said the Toyota Way would likely become enshrined as the industry's gold standard, and the model to mimic or surpass for new challengers from South Korea and China.

"This proves that the Toyota Way is more than just an odd, quirky theory," said Chester Dawson, author of "Lexus: the Relentless Pursuit."

"Being No. 1 means Toyota now sets the standards that everyone has to beat," he said.

For Toyota, the immediate concern appears to be avoiding any political fallout from passing GM. Friday morning, Toyota's president, Katsuaki Watanabe, treaded lightly around the issue of whether his company would overtake GM, while announcing at least one new factory in North America. At a press conference in Nagoya, near his company's Toyota City headquarters, Watanabe said passing GM "is just a question of results," and not a significant event for Toyota, according to Bloomberg News.

Watanabe said that Toyota will add a factory in Woodstock, Ontario, in 2008, its second in the town. He said Toyota is also considering another factory somewhere in North America, the company's ninth in the region. Toyota has been building plants in the United States since the 1980s, partly to blunt trade criticism.

Last month, Watanabe presided over the opening of a $1.28 billion pickup truck plant in San Antonio. The expanded production will help Toyota to meet U.S. sales gains without increasing exports from Japan, a Toyota executive vice president, Tokuichi Uranishi, said, according to Bloomberg News.

Watanabe also addressed Toyota's growing number of recalls this year, which have tarnished the company's reputation for sterling quality. In Japan alone, Toyota has recalled 1.2 million vehicles this year, prompting the transport ministry to order the company to improve quality control.

"There will be no growth without quality," Watanabe told reporters, according to the Associated Press. "We'd like to continue our efforts to make good products that win support from our customers."

Analysts say the growing number of defects could seriously undermine the company in the long run, especially if they are a symptom that Toyota is losing its grip on quality control as it charges forward with expansion.

© Copyright 2006 The Detroit News. All rights reserved.


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