Toyota Topples The King
Wednesday, April 25, 2007
General Motors' 76-year reign as the world's largest automaker is over.
Fifty years after its cars first hit U.S. shores, Japanese automaker Toyota has surged past the 20th-century American colossus, selling more vehicles worldwide than GM during the first three months of this year.
Though GM played down its fall to No. 2 among the world's automakers, the sales news is the latest blow to the reeling company, long a symbol of American industrial might. Beset by tens of thousands of layoffs, plant closings and staggering financial losses in recent years, GM has now let slip the one thing it could always fall back on: bragging rights as automaker to the planet.
"What we are talking about is one quarter," said John M. McDonald, a GM spokesman. "We are not focusing on a sales race. We are focused on taking advantage of growth opportunities around the world."
As No. 1 -- a position it is likely to hold throughout the year, at least -- Toyota may find itself drawing the attention of protectionist lawmakers, environmental activists and union organizers, as GM has for several decades.
The global sales benchmark had been looming for years, and its realization was only a matter of time, analysts said. In the United States, GM still sells the most vehicles, owning about 23 percent of the market, compared with Toyota's 16 percent.
However, Toyota and its Asian cohorts, Honda, Nissan and Hyundai, have largely captured the U.S. passenger-car market, continuing to offer more fuel-efficient vehicles that also typically receive higher marks for quality than models produced by GM, Ford and DaimlerChrysler.
The shift to Toyota from GM is as much cultural as economic. For decades, GM makes and models sentimentally filled the American songbook and film canon -- Rocket 88, pink Cadillac, '57 Chevy. Today's car buyers, however, now prefer the names Camry, Lexus and Prius, which have worked their way into the American lexicon as symbols of status and hipness.
Analysts said GM was working to rebound by expanding rapidly overseas, chiefly in China, and sacrificing sales of low-profit, stripped-down models to U.S. rental car companies to resuscitate its money-losing North American operations. GM blamed the first-quarter sales numbers on the paring down of its rental-car sales.
"This is a long time coming," said Harley Shaiken, a labor professor at the University of California at Berkeley. "It's not a surprise, but it is more significant than either party would care to admit."
GM had managed to hold on to its shrinking lead over Toyota in recent years, but the two companies are heading in opposite directions. GM has lost $12.4 billion over the past two years and plans to close 12 North American plants by the end of next year. By comparison, Toyota reported a profit of about $12 billion during its most recent fiscal year and expects to open its eighth North American factory in 2010.
For the first three months of 2007, Toyota sold 2.35 million vehicles worldwide, compared with 2.26 million for GM. Notably, Toyota's sales were up 9.2 percent over the first three months of 2006, while GM's were up 3 percent.
Last year, GM sold 9.1 million vehicles to Toyota's 8.8 million.
Toyota expects to sell 9.3 million cars in 2007; GM does not provide forecasts.
A Toyota spokeswoman declined to make executives available for comment. The company said Toyota was not focused on rankings but only on being the "number one brand for our customers."
Analysts say Toyota refuses to trumpet its spot atop the sales charts for fear of a protectionist backlash. Toyota has taken great pains to identify itself as an American company and to locate plants in the South. So far, that investment has bought peace for the company in Washington. But it may not last.
"Anytime you have a company like that overtaking a U.S. company, I think there are going to be some who are really going to take notice of that in possibly negative ways," said Brian Pomper, a former chief trade counsel for the Senate Finance Committee.
Pomper said there could be more calls for examination of Japan's currency policy and even greater zeal by senators from Western states who are trying to pry open Japanese markets to American beef. "That interest is likely only to intensify," Pomper said. "There will be people in the political realm who will use this however they wish."
GM now finds itself in the same position as Ford in the 1930s, when GM wrested the sales lead by building what consumers saw as a "value car," meaning an automobile that consumers would buy even though it cost more than its rivals, auto historian Michael L. Bromley said.
Legendary GM executive Alfred P. Sloan, who ran the company from 1923 to 1946 and chaired the board until 1956, established annual updates in car models and sought to sell a car for "every purse and purpose."
Throughout much of the 20th century, Sloan's philosophy created an aspirational ladder that reflected the rise in status and accomplishment of Americans through their lives. The sportier, entry-priced Chevrolet was targeted at the young male, fresh out of college or the service. As he aged and moved into middle management, he was urged to trade in his Chevy for the more respectable Pontiac or Buick. The spot where he topped out on the corporate ladder was often telegraphed to his neighbors by his last GM car, either the high-end Cadillac or its second-tier cousin, the unimpeachable Oldsmobile.
GM's U.S. market share was nearly 50 percent in the mid-1960s. But as Wilt Chamberlain famously said, "Nobody roots for Goliath." GM found itself the target of environmentalists beginning in the 1970s. At the first Earth Day celebration, in 1970, activists protested GM as the No. 1 maker of internal-combustion engines.
In the years following, GM and Detroit were hammered by oil crises and wave after wave of fuel-efficient Japanese imports, blows that confused the Big Three and from which the automakers are still recovering.
"I just wrote an article on autos in the '70s and how the industry collapsed on itself," Bromley said. "It broke my heart to write that article."