General Motors (GM), less than two years after declaring bankruptcy, is poised to reclaim the global auto sales lead from a Toyota Motor rattled by both natural disasters and reports of slipping quality.
GM may retain the top spot after auto-parts production in Japan recovers from the March 11 earthquake. Detroit-based GM plans to invest at least $5 billion in China to double sales to 5 million vehicles by 2015. After years of losing ground in the US to cars like Toyota’s Camry, GM’s Malibu has won better reviews and a new version is coming.
Add it up and GM may retake the sales crown lost in 2008, when the US automaker lost $30.9 billion and sought a federal bailout following Toyota’s most profitable financial year. Today GM is on the mend while Toyota confronts a slumping reputation, a stronger yen that hurts profit on US sales, and the prospect that its production in Japan won’t recover until November.
“It’s safe to say that GM is crawling back in the mature markets and growing quickly in emerging markets,” said Jeff Schuster, executive director of forecasting for J D Power & Associates, a research firm in Westlake Village, California. “It’s a challenging road ahead for Toyota. They face some real issues in the US.”
Toyota President Akio Toyoda in March said he would start a campaign to rebuild the company’s image in the US following recalls that totalled more than 10 million vehicles. Toyota had to repair the cars because sticking accelerator pedals and faulty floor mats led to some sudden acceleration claims.
The Toyota City, Japan-based automaker this week plummeted to 43rd place from number twenty in a Harris Interactive’s annual poll assessing the reputation of 60 corporations.
Malibu rising
Even before the recalls, auto critics were saying the competition had started catching up to Toyota. Edmunds.com rated the 2008 Malibu higher than the Camry. While Consumer Reports still recommends many Toyota models, its critics find Toyota is using cheaper interior materials these days, said Jake Fisher, senior auto engineer with the Yonkers, New York, magazine.
Toyota’s margins have also been hurt by a weaker dollar. Of the cars and SUVs the company sells in the US, about 30 per cent are made in Japan, including 11 of 12 Lexus models and all Prius hybrids. After years of a weak yen boosting profits, the Japanese currency has strengthened to ¥81 to the dollar from 112 at the end of 2007.
Each ¥1 change versus the dollar equates to about ¥30 billion ($370 million) of effect on profit, Toyota said.
In China, the world’s fastest-growing car market, Toyota has been slower to invest in factories and small, inexpensive cars.
GM’s China momentum
GM arrived earlier and has won over consumers with high-end Buicks and cheaper Korean-engineered Chevrolet models, said Michael Dunne, president of Hong Kong-based Dunne & Co, which consults on the auto market in China and the rest of Asia.
“GM has the right products and very good momentum,” Dunne said.
The bankruptcy proceedings left GM with a strengthened balance sheet, and the carmaker has maintained market leadership in the US and China.
