December 28, 2006

Will There Be a New King of the Road in 2007?

Filed under: Business Moves,Economy,TWUQs — Tom @ 2:15 pm

Looks like itFrom an AP report in USA Today, a report that is surely causing heartburn in Motown:

Toyota set to overtake GM in 2007
Dec. 22, 2006

NAGOYA, Japan — Toyota (TM) announced on Friday a global production target of 9.42 million vehicles for next year, increasing the odds that the Japanese manufacturer will pass troubled General Motors (GM) as the world’s No. 1 automaker.

The latest figure, announced by Toyota in a release, marks a 4% increase over the 9.04 million vehicles the company expects to produce this year and easily clears the 9.2 million vehicles GM is estimated to have produced this year.

GM does not give targets for next year, but it has been forced to scale back production recently, seeing its market share eroded by Asian automakers, including Toyota, which have a reputation for better mileage.

….. Although GM says the perception that its cars are gas-guzzlers is unfair and inaccurate, it is undergoing restructuring after racking up more than $10.6 billion in red ink last year and $3 billion more the first nine months of this year.

Toyota, on the other hand, is on a roll. Despite some quality problems, it is reporting record profits, churning out best-sellers like the Camry and Corolla as well as carving out a reputation in hybrids, which use a fine-tuned technology of switching between a gasoline engine and electric motor to save gas at a time when oil prices are rising.

Toyota, which passed up Ford (F) as the world’s No. 2 automaker in 2003, also painted a bright picture of sales in 2007. It is expecting to sell 9.34 million vehicles globally next year, up from 6% from 8.8 million expected for this year.

Toyota has been plagued with a rising number of recalls as it standardizes parts to cut costs and develops and sells more vehicles at a faster pace. Its challenge is to maintain its reputation for quality cars and customer satisfaction at the same time that it continues to rev up production.

“There will be no growth without quality,” Watanabe said, adding that quality will be closely monitored at all levels of production, including design, development and procurement. “We’d like to continue our efforts to make good products that win support from our customers.”

Although Toyota’s production methods, which empowers assembly line workers and trims inventory, are praised by experts, transporting that production to new places remains a challenge.

….. Watanabe said the company is considering adding another plant in North America to keep up with growing demand, although he did not give details.

Of Toyota’s projected volume for next year, overseas production will rise 8% to 4.27 million vehicles while its domestic output will increase 1% to 5.15 million vehicles, the company said. The projections include Toyota’s subsidiaries, truck-maker Hino Motors and Daihatsu, which makes small cars.

In the U.S., the first Tundra pickups rolling off of Toyota’s Texas plant will arrive in showrooms in 2007, a sign of Toyota’s ambitions in a lucrative sector dominated by American automakers.

Toyota has used its ample coffers to purchase significant stakes in two of GM’s former Japanese alliance partners — Fuji Heavy Industries, the maker of Subaru cars, and truckmaker Isuzu. Toyota will be even using Fuji’s Indiana plant to make Camries starting in spring 2007.

The latter portions of the excerpt show that:

  • The company is not going to have a cakewalk to Number 1; if its quality reputation ever takes a real hit, things could reverse quickly (just ask Ford, whose fortunes turned for the worse not very long after its long winning streak of having the best-made American cars evaporated).
  • The company is taking up some of the auto-industry employment slack in North America caused by the decline of the Big Three.

Unfortunately, Toyota-related employment growth, with the possible exception of a few lower-level suppliers, will happen almost entirely in states other than Michigan. I wonder if that guy who crusaded against a Toyota plant in Western Michigan earlier this year and appears to have scared the company away from building in the state (there has been no news since the linked report) is proud of himself?

ALSO: It’s apparently a foregone conclusion that Toyota will be Number 2 in America next year, displacing Ford.

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