Toyota Motor Corp.'s ascent to the top with ever-improving profits has been rapid and seemingly inevitable. But the race is far from over. To assess the relative status of GM and Toyota, Automotive News measured five key indicators:
1. Dominance of the home market.
2. Expansion in fast-growing overseas markets.
4. Partnerships with suppliers and other automakers.
5. Corporate culture.
Toyota's complete dominance of its home market in Japan gives it a huge advantage over GM.
On the down side, Japan's automotive market has been stagnant for the past 20 years. But with a home market share of 40 percent, Toyota can count on steady revenue and profits. Toyota can roll out new technology and vehicles in its home market, then seek additional volume overseas.
By contrast, GM has virtually no presence in Japan. In the 1990s, the company formed a partnership with Toyota to sell the Chevrolet Cavalier in Japan, then introduced its Saturn brand. The cars bombed.
None of this would amount to much if GM still dominated the United States. Thirty years ago, GM accounted for 50 percent of total U.S. sales of cars and trucks.
But those days are gone. The United States — once GM's turf — is up for grabs. This summer, GM's share of the U.S. market declined to 21 percent, while Toyota now is the nation's second-biggest automaker.
|5 key categories|
|For a company to be the world's global automotive leader, these 5 areas are crucial. Here's our take on who's ahead.|
|1. Dominance at home||Toyota|
|2. Expansion overseas||GM|
|5. Corporate culture||Toyota|
GM has a head start in China, Russia and Brazil, says George Magliano, director of auto research at Global Insight. Derivatives of GM's small European models are doing well. And GM is using its GM Daewoo joint venture in South Korea for low-cost manufacturing and engineering. With Daewoo as the locomotive, GM has reason to expect that its global Chevrolet brand will prosper.
"They have a much better global footprint than Toyota," Magliano says. "They have made aggressive moves in all the emerging markets, and they are using their Daewoo plants well."
GM is expected to sell 1.4 million units in Brazil, Russia, India and China this year, while Toyota is projected to sell 981,000 units, predicts Ashvin Chotai of Intelligence Automotive Asia.
But Toyota is investing heavily in new assembly plants. Perhaps most important, Chotai expects Toyota to eclipse GM in the crucial China market.
So GM clings to its lead in the Brazil-Russia-India-China markets, although Toyota is closing the gap.
Advantage: General Motors.
GM has introduced hybrid powertrains, cylinder deactivation, six-speed transmissions and direct injection gasoline engines.
But its costly bet on fuel cells has yet to pay off, and it is pursuing a risky, go-for-broke plan to develop the Chevrolet Volt. Toyota also is developing its own plug-in hybrid. But even if it fails, Toyota still has the Prius.
The history of the Prius highlights one of Toyota's secret weapons — the patience to wait for the payoff on a big investment.
"Only the wealthiest of companies can indulge in such projects," says Michael Wynn-Williams, senior analyst at Global Insight. "Toyota does not have a time horizon on its newest technologies or a deadline for earning a profit. ... It can afford to play the long game."
GM has a superior lineup of fuel-efficient diesel engines — which may yet attract a mass market in America — but Toyota still seems better able to make use of its technology.
Advantage: Toyota.Suppliers Toyota's tight bonds with its suppliers show no signs of weakening. Toyota still dispatches executives to its parts makers and still counts on suppliers to jointly develop new products.
Toyota could not hope to penetrate overseas markets without the help of reliable allies such as Denso Corp. and Aisin Seiki Co.
"The keiretsu is very much alive at Toyota and are a critical extension of itself," says Chotai. "Toyota supports its suppliers with business, while suppliers are expected to support its technology as well as geographic expansion."
The keiretsu proved especially valuable in the development of hybrid powered vehicles. In the race to develop a reliable lithium ion battery, for example, Toyota is counting on partners such as Matsushita Electric Industrial Co.
By contrast, GM has had a difficult relationship with some key suppliers.
Every year, Planning Perspectives Inc. of suburban Detroit surveys North American suppliers about their relationships with the Big 6 automakers. Every year, GM places last, or close to it, while Toyota finishes on top. To make things worse, GM is having trouble with former in-house parts operations that it has spun off.
Delphi Corp. entered Chapter 11 reorganization in 2006, and GM has spent billions to prop it up. Another spinoff, American Axle & Manufacturing Holdings Inc., forced GM to curtail truck production this year after the UAW launched a three-month strike.
In the second quarter, GM declared a $2.8 billion write-off because of the cost of restructuring Delphi, plus a $197 million write-off because of the American Axle strike. It is difficult to imagine Toyota encountering such troubles with its suppliers.
Advantage: Toyota.Corporate culture In the upper reaches of management, both Toyota and GM tend to be insular. They develop their own talent, and that talent stays with the company.
To avoid the pitfalls of parochialism, both companies dispatch fast-track executives to key overseas markets. But as GM and Toyota rely increasingly on overseas markets, one wonders whether they will draw more foreign executives into their upper ranks.
Will Toyota, often cited as the most Japanese of Japanese companies, become truly international and open its upper echelons of management to a foreigner, as Nissan Motor Co. did with Carlos Ghosn?
The departure of Jim Press, the only foreigner on Toyota's board, to Chrysler LLC last year highlighted the pitfalls of fast-tracking foreign talent.
But Toyota has one key cultural trait that distinguishes it from other automakers: the Toyota Production System. One might argue that this is Toyota's secret weapon. Its production system, which ensures Toyota's status as the world's most efficient automaker, has allowed the company to expand rapidly into new markets without overreaching.
Will GM and other automakers catch up over the next couple of decades? Possibly, but for now, Toyota has the lead.
Advantage: ToyotaA close race Given its comparative advantage on suppliers, technology, home market dominance and corporate culture, Toyota has the upper hand for now.
But GM has a strong — and aggressive — presence in the world's fastest-growing markets. And if GM can leverage its overseas lineup of vehicles to revive its U.S. fortunes, the company will be poised for a rebound.
One veteran observer, Michael Robinet, vice president of CSM Worldwide, issued an industry report this year suggesting that it's too early to crown Toyota. Wrote Robinet: "Appointing a clear winner in the global automotive sweepstakes is folly." n