Toyota 2007 car output could make it world's No. 1

NAGOYA, Japan (Reuters) - Toyota Motor Corp. <7203.T> said on Friday it expects to produce a record 9.42 million vehicles in 2007 -- a 4 percent rise that should see it overtake General Motors Corp. <GM.N> as the world's biggest auto maker.

As the Japanese firm lures buyers worldwide with cars that are safe, affordable and fuel efficient, U.S. rivals GM and Ford Motor Co. <F.N> battle falling market share, closing factories and shedding thousands of jobs.

Soaring fuel prices have battered Detroit's auto heartland, with customers shunning gas-guzzling pickups in favor of cheaper-to-run models from Japanese and South Korean car makers.

Toyota, which makes the Camry, Yaris and popular Prius hybrid cars, has overtaken Chrysler Group <DCXGn.DE> in the United States and is expected to pass Ford next year, market forecaster Edmunds.com says.

In the first 11 months of this year, Ford had a 16.6 percent share of the U.S. market, while Toyota's share was 15.3 percent. Ford has said it expects its U.S. market share to slip to 14-15 percent next year.

The Toyota group, which includes minivehicle maker Daihatsu Motor Co. <7262.T> and truck maker Hino Motors Ltd. <7205.T>, forecast 2007 global sales for the group of 9.34 million vehicles next year, up from an estimated 8.80 million units this year.

GM does not provide sales or production forecasts on an annual basis. Adding GM's January-September global sales to its production plans for the current quarter puts its 2006 volume at 9.168 million vehicles.

At the parent level alone -- Toyota, Lexus and Scion -- Toyota expects to boost 2007 output by 4 percent to 8.47 million and sales by 6 percent to 8.40 million units.

In the year to March, Toyota expects to earn a net profit of 1.55 trillion yen ($13.1 billion) -- a record for any Japanese company.

Toyota shares have gained almost 27 percent this year to a record high, valuing the Japanese firm at close to $230 billion -- about 14 times GM's market capitalization.

Toyota President Katsuaki Watanabe, however, has stressed the need to stay focused on challenges such as improving vehicle quality amid an increase in the number of vehicle recalls.

To keep profits growing in tandem with sales, Toyota is continually looking to cut costs, such as merging more car components. What it saves in costs, it hopes, will give it more to spend on developing new cutting-edge technologies.

Through aggressive marketing and better product, Toyota aims to boost sales of its premium Lexus cars to balance out margins with increasingly popular compact cars.

Elsewhere, Toyota last month formed an equity tie-up with truck maker Isuzu Motors Ltd. <7202.T> in a bid to catch up in clean diesels -- a rival technology to its signature hybrid system. Last year, it took a stake in Fuji Heavy Industries Ltd. <7270.T>, partly as a way to quickly add production capacity in North America.

"Toyota is securing a solid earnings base as its production methods are deployed worldwide and global demand shifts to fuel-efficient vehicles," Goldman Sachs auto analyst Kunihiko Shiohara wrote in a recent report.

"Its annual vehicle production is likely to increase about 500,000 every year for the next few years and we expect operating profit growth of about 10 percent for the next three years," he added.

One hole Toyota has yet to fill is the development of cheap, tiny cars to compete in emerging markets such as India.

Watanabe believes this is a top priority to ensure future growth, especially as mature markets in North America, Europe and Japan see sputtering demand.