Is Toyota the New GM? Nah. But Detroit's Enjoying Some Role Reversal
Could longtime GM archrival Toyota be taking a page out of GM's old playbook? Short answer: No. This isn't a company headed for bankruptcy. But there is a bit of a role reversal in the fortunes of the auto industry, and Detroit is bound to be gleeful while Toyota frets.
In November, according to just-released sales figures, GM sales were up a nice 11%, while Toyota fessed up to a 3% drop--more than the 2% analysts had forecast.
Of course, sales figures for a month or even longer don't tell the whole story. Why the glee? Instead of watching Detroit chase--or ignore--the triumphs of Japanese makers, the automakers and all of us can tune in to a new storyline. Toyota is facing problems that echo those of pre-bankruptcy GM. It ran too many plants, carried too many brands, built uninspiring cars and maintained a rep for poor quality.
Not Your Grandfather's Toyota?
Take one product problem: The youth-oriented Scion brand isn't living up to its potential. That's not only a Scion problem, it's a measure of Toyota's challenge in seducing younger buyers. Their demographics in the U.S. are looking old, which is never good news if you're interested in growth.
More immediately, Toyota continues to pay a price--and it's hard to predict how high--for the major dings to its quality reputation from the unintended acceleration issues. WIth recalls and alerts continuing, it's bound to be a factor. That's despite anything that helps clear Toyota's name in lititgation or other reviews. And of course it's a measure of the quality problems the company has to fix.
Meanwhile, Chrysler, Ford and GM are putting out some of their most compelling new models in years, like the redesigned Jeep Grand Cherokee, Ford Fiesta and Cadillac SRX. Ford in particular saw a big sales jump--24%-- in November.
But you have to look at the numbers behind the numbers. Toyota is practicing what many corportate strategists preach: sacrifice share, deliberately, to protect profit. U.S. sales numbers are soft and cutting into profits with its U.S. incentive spending is up. Still, it's not spending more to woo buyers than its domestic competitors, and could even afford to do more. All the automakers have found the religion of putting profits ahead of market share. Chrysler, Ford and GM came to it only when they were close to bankruptcy or actually into bankruptcy, in the case of Chrysler and GM.
Why Toyota Should Still Scare Detroit
There's still plenty to envy (or emulate) about Toyota. It's solidly profitable worldwide, earning about $3.25 billion in the first half of its fiscal year, vs. a loss of $583 million a year earlier. And Toyota is sitting on a big pile of cash and other liquid assets, about $42.2 billion at the end of the last quarter, vs. $35.8 billion for GM, according to company reports. So Toyota is still a formidable competitor and can spend its way out of a lot of trouble.
With 11 months of the fiscal year gone, the November reports tell me that Toyota's unspoken U.S. sales target is to do what it takes to keep unit sales even with last year. Here are the details: U.S. auto sales for Toyota were 129,317 in November, down 3.3 percent from a year ago, according to AutoData. Total U.S. auto sales were up 16.9 percent for the month, to 873,323.
Year to date, Toyota sales were up less than 1 percent, to about 1.6 million. The U.S. market as a whole increased 11.1 percent to 10.4 million.
According to analysts at TrueCar.com, Toyota incentive spending was up about 35 percent in November, to $2,220. That's less than Chrysler ($3,452), Ford ($2,942) or GM ($3,350). It's also less than Nissan ($2,764), and comparable to Honda ($2,162).
Game on. And then some.
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