Toyota in the Driver’s Seat
General Motors Corp.’s loss is Toyota’s gain.
GM has been the world’s largest automaker since 1931, but Toyota Motor Corp. looks to claim that crown as early as next year as it continues to grow in the softening U.S. auto market as well as in Asia, Europe and South America.
Toyota didn’t introduce its first car in the U.S. -- a pokey four-door sedan called the Toyopet Crown -- until 1958. Four-and-a-half decades later, the Tokyo-based company has plants in 27 countries, sells cars in more than 170 nations and is ramping up production worldwide.
As GM tries to win customers with deep discounts, Toyota is raising prices on some models. Unlike GM, the Japanese automaker is winning market share by making quality vehicles that people want to buy.
The situation casts a blinding spotlight on the changes sweeping through the once-insular U.S. auto industry, which is now shaped largely by global competition.
“We are seeing a confrontation between the old and the new,” said David Cole, director of the Center for Automotive Research in Ann Arbor, Mich.
Bob Schnorbus, chief economist at automotive consultant J.D. Power & Associates, said Asian automakers had advantages over their U.S. counterparts.
“The American Big Three have been trying to fend off competition in this market with redundant workers and factories, and that has been a weight dragging them down,” he said.
Import brands have overtaken American automakers in the economy car, sporty sedan and luxury car markets, and in the last decade have begun making significant inroads into the sport utility vehicle and pickup truck segments.
Toyota’s Camry is the best-selling passenger car in the U.S., its Prius is the most popular gas-electric-powered hybrid, and for the last five years the company’s Lexus has been the top-selling luxury brand.
“The American auto companies have been unwilling to address the clear encroachment by the Asian competitors on some of the top vehicle lines,” said Catherine Madden, an auto industry analyst at economic consulting firm Global Insights in Lexington, Mass.
“Ford’s Taurus used to be the leader in the family sedan category, but for years now the leader has been Toyota’s Camry,” she said.
A big distraction for American automakers has been the need to tackle soaring healthcare costs, huge pension liabilities and aging plants: One engine factory that GM plans to close will celebrate its 100th birthday this year.
By contrast, import carmakers have been able to come into North America with a clean slate. Their plants are modern and have been located largely in rural Southern states to avoid labor unions, which keeps operating costs low.
Although most of the foreign automakers offer pay and benefit packages that are close to those that unionized autoworkers receive, Asian and European carmakers have younger workforces and aren’t saddled with the huge numbers of retirees the American car companies are supporting.
Toyota has fewer than 1,000 North American retirees, versus more than 400,000 at GM. Rick Wagoner, GM’s chief executive, has said that health and pension costs add $1,500 to the price of each GM vehicle. That compares with about $300 per vehicle at Toyota.
“That’s a lot of money that Toyota can use for product development, design and marketing that GM can’t,” analyst Cole said.
Whereas GM is shrinking in its largest market -- the U.S. -- Toyota is forecasting its 12th consecutive year of record sales here and its fourth straight year of record profit.
In October, when total U.S. auto sales fell by 14.4% -- the worst decline in nearly a decade -- Toyota’s sales rose 1.3%. It was the only large automaker to score a gain in the U.S. and at month’s end had a 13.2% market share. GM ended October with a 26.4% share, its lowest in decades.
Wall Street long ago sensed this tectonic shift: Toyota now has a stock market value of $179.4 billion, almost 14 times that of GM.
To keep the momentum going, Toyota is planning a stream of new vehicles for the U.S. market next year, including a subcompact, the Yaris, from Japan, and a mid-size SUV, the FJ Cruiser. Also on tap: a redesigned Camry family sedan, a hybrid version of the Camry, a redesigned RAV4 small SUV and several new Lexus models, including a hybrid version of the GS sedan.
Whereas GM and Ford Motor Co. are planning North American plant shutdowns, Toyota is building an assembly plant for full-size pickups in San Antonio -- set to open next year -- and a plant in Canada for the RAV4 that is to open in 2008. It also plans to boost capacity at its $140-million plant near Tijuana.
Toyota opened its first U.S. assembly plant in 1984 and now has 13 plants in North America and more than 35,000 employees. About 65% of the passenger vehicles Toyota sells in North America are made here.
Auto analysts expect Toyota to announce 2006 global sales and production goals next month that could total 9.2 million cars and trucks, a target slightly above the 9.1 million vehicles that GM is expected to build this year.
Although GM hasn’t stated its 2006 goals, it is cutting production and closing plants as it tries to regain profitability. As a result, Toyota -- which overtook Ford in 2003 to become the world’s second-biggest automaker -- could seize the crown from GM much earlier than expected.
“Unless GM really puts the pedal to the metal, which is unlikely with all it is going through, it does seem that Toyota will have a bigger global market share by the end of next year,” said George Peterson, president of AutoPacific Inc., a Tustin-based global auto industry consulting firm.
